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Confessions of an IT Business Owner

Confessions of an IT Business Owner is a podcast where we share inspiring stories of IT Business Owners, just like you, on how they’ve become healthy by improving their cash flow, automated their businesses, and built trust with their clients and prospects by looking more professional, growing their MSP’s.

Listen to our latest episode:

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Scott Spiro, CEO of Computer Solutions Group.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Bob DeLisa, CEO of Cooperative Systems.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Angel Rojas, CEO of DataCorps Technology Solutions.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Joy Beland, CEO of Pink Hat Technologies.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Jason Etheridge, CEO of Logic Speak.

Hey everyone, welcome to another edition of the Confessions of an IT Business Owner Podcast, where we share stories about how healthy cash flow is critical for the health of your IT business, automation is paramount, and how building trust with your clients by looking more professional is going to help grow your business. I’m your host, Dave Scott, and today, we’re honored to have with us, the CEO of Logic Speak, Jason Ethridge. Today, we’re going to chat about some pretty in-depth things about the wins and losses inside of what it takes to grow an IT business.

Jason Etheridge:

If we’d have continued on that path, we would have imploded, because we would have never been able to keep up. And, all of the growth that we had experienced would have eroded.

Dave Scott:

Here’s the podcast with Jason.

Hey Jason thanks a lot for joining us on the Confessions of an IT Business Owner podcast. I appreciate it and appreciate your time very much.

Jason Etheridge:

Thanks for having me.

Dave Scott:

Talk to me a little bit about the name of the company where you were from and what you all do. Let’s start out with your baseball card stats?

Jason Etheridge:

There you go. So my company is Logic Speak. We are a managed services provider here in Atlanta, Georgia. And we’ve been in business for almost 14 years now. We started our company in 2004.

Dave Scott:

Well, 14 years. That seems like a long time in business years, doesn’t it?

Jason Etheridge:

That’s like a lifetime in dog years.

Dave Scott:

It is. If it was a Chihuahua, you’d be old and gray underneath your chin. So Jason, talk to us a little bit about the problems that your MSP solves and maybe if you want, this is all about you, so do you verticalize, do you specialize on one thing? Do you service just health care, nonprofit, education small B2B business? So talk about the vertical that you serve and maybe the problems that you’re solving for your clients.

Jason Etheridge:

Yeah. Great question. We don’t actually do verticals yet. We do have core competencies in a couple of different verticals but we haven’t yet said, “These are the verticals that we service.” Essentially what we say is that we focus on professional services companies, generally B2B companies, that primarily use technology for their business. And so, the problem that we attempt to solve is to bring proactive managed services to the client so that they’re down less often, so that they are more efficient, more productive and ultimately, we’re more profitable because the less time they’re down, the higher our margins.

Dave Scott:

That makes sense. So talk to us, you touched a little bit about the pain points you saw for businesses, but who is your ideal business, who is your ideal persona or your ideal client and why?

Jason Etheridge:

Yeah. So, throughout the maturity of our company, just like many small businesses, you start by doing work for anyone who will pay you and you’ll do anything that they’ll pay you to do. And over the last 14 years or so, we have started to mature and grow and knowing who we are, we’re a teenager now. We think we know who we want to be, and so, we focus on companies that are anywhere from 20 employees all the way to our largest customers, about 400 employees strong.

Engineering is a good target for us. The engineering space, I happen to be married to an engineer, so I kind of have it in there and the inside track on the unique challenges of an engineering firm. And then, we are also really heavy into the financial services sector. Financial planners, accounting firms, CPA and tax firms as well.

Dave Scott:

I like it. Yes, being married to an engineer sounds crazy cool, I like that.

Jason Etheridge:

It has its unique challenges as well as its unique benefits. We are two small business family, we also have a two year old and so we like to say we actually have three kids.

Dave Scott:

That is awesome. So is she a partner at this firm or she just works there is a W-2 employee?

Jason Etheridge:

No, she owns her company as well. We are we’re fully immersed in the entrepreneurial spirit. Let’s say it that way.

Dave Scott:

So talk to me a little bit about that. Let’s go down that path because typically, what we find in with our partners, MSPs, is that it’s usually a husband or wife team. Wife will do sales, marketing, bookkeeping whatever. The husband might do the actual implementation, onboarding, technical aspect or vice versa of those roles, it all varies per company, but that is super unique. How does that work inside of your house every night?

Jason Etheridge:

It works on an ongoing basis. We have to be very intentional. Her company is a little bit younger than mine, like I said, we’ve been in business for about 14 years, she’s been in business for about five or six. I probably hit certain milestone before her. There is a tendency to want to participate each other’s businesses, to give each other advice. And we do that when requested, we certainly talk a lot about business at home. But we decided very early on that we wanted husbands and wives and business partners and that we couldn’t do both.

I know a lot of people who are husband and wife teams. We both are type-A red people, if you are familiar with those kind of terms. We decided we couldn’t really work for each other. But we do talk a lot about business and of course I provide all the IT support for her company. If we’re not intentional, work can take over and we’ll put our son to bed and go sit at home on our laptops and work through the night. There’s a tension between spending time at home with each other and focusing only on work.

It’s one that we constantly manage, and don’t always get it right and the pendulum swings back and forth. But we try our best is to both have really healthy family lives as well as focus our business as well.

Dave Scott:

Good for you guys for being committed to doing it. And yeah, I love that word intentional. That’s a word we use a lot around here in the office. I got to imagine carving out time for yourselves and your family and your little boy. That’s got to be challenging, carving out time and not becoming overworked, so to speak.

Jason Etheridge:

It is a daily intentional thing, that’s for sure.

Dave Scott:

Yeah. One of our guests, Bob De’Lisa, he was on our podcast a couple of weeks ago and he talked about your business being your mistress and you can get lost in it. And if you’re not intentional with your time, it can not only be good, but it can be really bad, so I’m not sure if he can relate to that sentiment.

Jason Etheridge:

More than you know.

Dave Scott:

Yeah, I bet. So talk to me about the role inside of your company. And thanks for sharing what you did about your family dynamic. That is really neat. What’s the role, what role do you play inside of Logic Speak, Jason?

Jason Etheridge:

Yeah. The good news about having the growth that we had and we certainly are still a small business, but we are at least to a point of what we call mass. We have a critical mass where I have made it to just being president and participating in the sales organization as well. But, I don’t on a daily basis take tickets, I’m not working in the business on the boots on the ground side of things. I really do get to focus more on, and not exclusively, let’s not kid ourselves.

I’m still a very technical resource. I do still help out from from an architecture perspective on projects as well as escalation of really complicated problems, I’ll certainly weigh in on and try to help, but my primary job is vision casting, leading the organization, managing our finances with my accountant, kind of from a high level. It’s funny, we talked about this today, me and my service manager, looking over the trees down at the horizon, not getting buried in each tree, each project, each deliverable.

Dave Scott:

Yeah. I wish more CEOs practiced that. It’s so hard to let go of a lot of those things you’ve been doing for so long, you know what I mean. So it’s really difficult to look over the trees, so to speak, and not get down into them, isn’t it?

Jason Etheridge:

No. For several years now, I’ve had kind of a word of the year that I talk about in our company kick off and then we try to tailor things around in terms of what we want to accomplish for that year. And the first time I ever did that, my first word of the year was intentionality. That we should do everything as if it were on purpose, and that we have to intentionally decide what we’re going to accomplish. It’s a very important to me, actually.

Dave Scott:

There’s a pastor friend of mine named Matt Chandler and he was diagnosed with brain cancer about six or seven years ago. He was in his late 30s by that time. And after he went through that bout of cancer and he got cured and everything and moved on from there, that was really his word, being intentional.

He’s a super intense, focused, very goal driven individual. I feel like you have some of those attributes and I love that about individuals who really put that into practice and it’s hard, it’s hard to not get distracted and waste time. Butt to your point, it’s so important we have such a limited resource of that. So it’s good that you guys figured that out.

Jason Etheridge:

Well, we try. Every day is not a a success, but when you’re trying to do that, when you’re being intentional, even if you fall off a horse, even if you fall off the wagon, the next day you hop right back on and set about accomplishing the goals that you set out. And it’s clarifying. From a vision perspective or vision casting perspective, when you set your mission clearly ahead … And everyone in our company knows what our mission is because I have literally plastered in almost every room of our company.

Because I want people to see it every single day as they walk through our office, I want them to constantly be reminded of what we’re here to do and why we’re here essentially. And so, that’s important.

Dave Scott:

Jason, talk to me about … Speaking of intentional, let’s be intentional and talk about some of the wins that you’ve had over the years. Share with us, if you could, about maybe some of the top couple of victories or wins that you’ve had over the last 14 years.

Jason Etheridge:

Yeah. I’m happy to. Probably my story, in a lot of ways, mimics a lot of your listeners. When I started out I was working for another company and we got gobbled up and acquired by Hewlett-Packard. And so we went from a company of 200 something employees to 140,000 employees, which, talk about culture shock, that is the very definition. I worked there for a while and then my business partner, who I started Logic Speak with and I decided that it was time for us to branch out on our own and that we really had a passion for the small business.

And that’s what we had known and where we had cut our teeth. That’s when we started Logic Speak, and ultimately, the name Logic Speak comes from the fact that we want to translate technology into the terms or into the language that our customers speak in the business so that we’re not using three-letter confusing acronyms and geek speak, that we’re actually translating what we know how to do into our customers business. So, that’s where the name came from.

We grew, our first three or four years were high growth, double, triple year revenue. People find out that you’ve struck out on your own, so you get a lot of organic growth that way. And then in 2008, we hit the housing crisis and thankfully, we weren’t that tied of the commercial real estate industry so we had to hang on with both hands. And we took a haircut. People always ask me, “What was that like to go through and what you do it again?” And certainly, I would never choose to do it again,.

But I will tell you, that that was a very clarifying time for our company because we had we gotten fat and happy, money had always come in. We never really struggled for money before and had some pretty big name client that helped keep us from worrying about money. But again, we’ve gotten fat and happy and weren’t as concerned with the profit margins as long as there was money in the bank. Money was increasing every month and so it was no big deal.

So when the housing crisis hit, we were forced, as many companies were, to have to learn how to do more with less. And ultimately, to have a hyper focus on efficiency. And those lessons that we learned in 2008, while I wouldn’t choose them to do again man, I wouldn’t trade them for the world because it has shaped the very nature of who we are as a company, and our focus on metrics and our focus on efficiency and productivity.

Those things we’ve got, we cut our teeth on those things during the crisis, that’s been a huge win. We made it through that. Like I said, we all took haircuts and we made it through that and then started growing again as the market started to improve and kind of really started to hit those, not necessarily double and triple, but really consistent growth rates. And in 2012, my business partner who I started the business with, he had two kids had a wife and that was getting burned out.

And I at the time was still single and so I carried the mission that we had originally started with and the vision for the growth that we wanted to accomplish. So we made the decision that that one of us was going to buy the other out, and since he was burned out and I still carried the mission, that it would be me bought him out. It was a very interesting process, which we could talk for a whole another podcast on, about the process of valuing your company and trying to decide what its worth to you, if you’re going to buy it, what ultimately you intend to do with it and what its value has for you.

So I did that. We negotiated on a number over the next three months or so and he felt like he didn’t get enough and I felt like I paid too much, which means it was probably the right number. And then when the deal is done, the dust has settled you sit back at your desk and this thing that you now own outright or after three years when the payments are made, the thing that you own, you now have to decide, what is the state going to be? What do I want it to be?

Dave Scott:

Because now it’s yours.

Jason Etheridge:

Yeah. Now it’s yours. There’s no one else to blame. Young can’t say, “Hey, this guy didn’t do what are you supposed to.” It is now yours. The first thing that I did, and I don’t really remember why, it probably was via a leadership podcast, that I’m a big fan of that I started to learn about this, but I really wanted a clarifying mission. I needed something to laser focus, sort of point my employees to as what was going to be Logic Speak 2.0. And the example that I’ll use, real quickly is that, when we started our company, you go through the business planning, you kind of follow traditional business planning and, “Oh, what you need is statement of value, you need a mission statement, you need all of these things.”

And so we had this big, long mission statement there was three paragraphs and talked about shareholder equity, all kinds of stuff that no one cared about. Nobody ever read. And if you asked any of our employees, they couldn’t tell you a single thing about it. So I started the process of creating a one sentence mission that encompassed what I believe and what I wanted Logic Speak to be, and that’s what we rallied around and that’s what I rolled out as Logic Speak 2.0.

If you’ll indulge me, I wanted to tell you what our mission is. Our mission is to use our our abilities and technology to have a positive impact on the lives of our clients and our employees. So it doesn’t say anything about shareholder value. It doesn’t say anything about business success or all of these things. At the end of the day, I feel like I’m put on a planet to have a positive impact on the people around me. And by way of extension, that’s what my company is here to do.

We’re here to serve people and have a positive impact on their lives, and if we’ve done that, then I feel like everything else will work itself out.

Dave Scott:

I love it. There’s one thing I want to go back to though, and that is a awesome mission statement. I love it, super clear, super succinct. Tell us what you do from a technical as well. So I love that addition in there. You talked about when you had parted ways with your former business partner, and by the way, it sounded like it went as good as it can. And there’s a friend of mine who owns and M&A company that actually services the IT industry. They’re called Revenue Rocket in Minneapolis.

And I hear all about the trials and challenges of M&A and buying out partners and buy-cell agreements. So yeah, I can totally relate to.

Jason Etheridge:

It’s emotional when it is something that yo-

Dave Scott:

It is.

Jason Etheridge:

It’s like Solomon splitting the baby. You’ve got to take this company and decide who’s going to take the baby or or split it up. And fortunately, Jared and I, he is a man of integrity. He never wavered in that. And so we were able to have a very calm, rational but sometimes emotional conversation about the value and the end of the day, we’re still friends. He’s moved on to another company and so we still get together every three to six months and chat and commiserate and laugh and cry together.

I really feel good about that because as you said, I’ve heard horror stories where courts get involved. It’s just awful, but it went really, really well.

Dave Scott:

Do you ever miss it? Do you ever miss having a business partner to bounce ideas and thoughts on and lean on in times of trial?

Jason Etheridge:

That is a great question actually that no one has ever asked me. You are person number one to ask me that question. I will tell you what I do miss, I miss the camaraderie. I miss being in the trenches with somebody where there’s no other choice but to succeed together. I kind of miss the shared, ho about this, the shared yoke, the burden that you can walk with somebody.

My advice to people today when they talk about starting businesses, especially if they start with a partner is that it shouldn’t be 50/50. We started with the best of intentions, we started with shared focus and shared goals and shared ideals. But it’s like I believe in a marriage, it has to be 51/49, at the very least because at the end of the day, somebody has got to be the tiebreaker. And if you’re not, then you ultimately, and this is what we fall into, you ultimately make decisions based on the nose, based on, we can’t agree on this, so ultimately the opportunity passes by.

It’s not a very good business practice to make decisions based on what you can and can’t agree on. If Jared and I had been for 51/49, we might still be in business together today. But but when you’re 50/50, it gets to be very challenging to make each other agree on things.

Dave Scott:

Yeah, it can. And I was in business with my college roommate, best friend. We’ve known each other since we were, gosh, 18, 19, 20 years old, whatever it was, and we’re both in our 40s now. And yeah, when I left that partnership, when I left working with him on a daily basis, that was the biggest thing I missed. I didn’t miss … I miss the daily grind and the sludging it out in the trenches, you know how it is.

You’re working together for a common purpose and your serving customers and hopefully making people’s lives better, and making a few bucks for yourself as well. But yeah, the camaraderie, the sharpening of iron as iron sharpens iron. That was a big thing that I missed, that we don’t work together every day anymore. And yeah, it sounds like you can totally relate.

Jason Etheridge:

And what I found, just real quickly for your listeners, the way to replace that, especially as you get to a certain size, because as you mentioned it does get very lonely at the top. And it gets stressful because that ultimately the buck stops with you every single time. That can be a very isolating feeling. I worked with an executive coach and his recommendation to me was, even if you’re the only owner, you should have a leadership team around you that can share the burden. I have never done that, because I didn’t want to burden other employees.

I didn’t want them to feel like they had the burden of the company when they don’t have any ownership. But he asked me a very clarifying question, he said, “When you were working for another company, if the CEO of that company had invited you into the conversation in terms of the leadership of the organization, would you have felt like it was a burden or would you have been privileged to do it?” And I said, “Oh my God, I would have loved it. It would have been amazing to be part of the conversations.” And he said, “Why would you rob other people at your company of that opportunity?”

I did that and now I have a leadership team and we meet twice a month. And I literally, I have hands open in that meeting. I tell them it’s a meeting of equals, it’s not me versus them or me telling them. It is literally us around the table, deciding how we’re going to lead this company forward. And I can bring tough decision to them, “Hey, we need to let go of an employee, hey, here’s our revenue, here’s our net profit. Have a look at it, and tell me what you think.” It has helped me to be able to again, have that camaraderie, have the partnership of people who care about moving the company forward.

You got to pick really good people to be on that leadership team. But if you do, they’ll help propel you forward and you’ll be able to replace that feeling.

Dave Scott:

I completely agree and dude, that is so spot on. There is a book that I have in my office, I’m actually looking at it right now called, Team of Rivals, and it’s about Abraham Lincoln’s choice of his political cabinet. The whole point of the book is, he found success, incredible success because he surrounded himself with good individuals, some of whom were really stubborn and appointed, and direct, but that made them sharper and better as a team.

They all had a deep profound respect, love and care about each other, and they all expressed that in written word. So, it’s a really touching book and it’s a really good book, you should read it sometime.

Jason Etheridge:

I’ll check it out. Similarly, I read The Big George Washington biography, and it’s funny you mentioned that. George Washington did the exact same thing. He had Hamilton and Jefferson, who were arch rivals and they were part of his cabinet.

Dave Scott:

So, talk to me about the day you left your old 9 to 5 job, and it sounds like you possibly were acquired. Let’s go back to that for a minute, you touched on it a little bit earlier. What was the feeling like, the instant or maybe the moment that you knew that being self-employed was the direction you were going to go in? Talk me through that day where you left your normal 9 to 5 and ventured out to create Logic Speak.

Jason Etheridge:

Sure. To back up just a step, when my business partner that I started the company with, I actually recruited him to work at that company that we got acquired at together. I recruited him to come work for me, and he said to me, he just got married and he said,” I will come work for you at this company, if you all agree that within five years, will talk at least about starting our own business together.” And so, I said, “Hey, of course.” I didn’t know it would come so soon. I said, “happy to do that.”

And it was only eight years later when HP bought us. So, it was very prophetic that that would have happened so quickly. But in terms of starting our own company and how I felt about it, I know this is going to sound weird, but I think I was just young and excited enough that from a risk perspective, I calculated everything based on the probability of something happening or the risk that something would happen. And so, I’ve never been one to shy away from a calculated or a strategic risk, or one where I believe the probability ways in my favor.

And so, I never had any sort of fears around starting my own business. I think I was young enough as well, I think I was 25 or 26 at the time. I didn’t have a family, I didn’t have a wife and a child to support. So I knew that if everything fell apart, that I had a network of really close friends and family that any of which would take me in. And so, you have to be willing when you have your own shingle out there or when you start something.

It’s like Columbus, when you get to the new world, you burn the ships. And that’s what I did. It took me a while again, to leave HP. And of course, Logic Speak was well underway at that point, we had everything planned, and we had our business plan. And our first client even. It was really perfect timing. I got the call, “Hey, I’m sorry, I’m really sorry you’re going to be laid off.” And they granted us the seniority from our own company.

So I got three months worth of severance, and that three months salary, was really the foundation of the investment into Logic Speak. I wasn’t upset at all, I’m like, “Oh okay, no problem, we’re good.” And so they were shocked that I wasn’t upset. Well, long story short, the HP transition team got word that I had been laid off, and I was the only one who knew anything about the infrastructure. So they made their way back to HP’s HR team and then made it back to me and then they said, “Congratulations, you’re not laid off anymore.”

And I said, “No.” And they said, “What?” And I said, “Well, no, you promised, I’ve already made plans. I’ve got things working and you can’t unlay me off.” Turns out from a legal perspective, they actually can’t unlay you off, but they made side deal with me, that if you agree to say one more month, we promise to lay you off again.

Dave Scott:

So, did this sweet severance come along with it, once they re-laid you off?

Jason Etheridge:

It did, exactly, because if they wouldn’t have done that, which they were nice and honored that. But if they hadn’t, I would have to quit with nothing. Instead, I got three months severance.

Dave Scott:

That’s interesting. How did your family feel about your transition? Maybe those close to you not necessarily your family because it doesn’t sound like you weren’t married at the time, but what did those around you say to you when you decided to venture out and start your own IT firm?

Jason Etheridge:

Thinking back on it, I think that was one of the coolest things, is that everyone to a person, was super supportive. Not everyone had advice for me, a lot of my friends and family, non of them at that age had started their own businesses before, but I just remember this outpouring of support for what we were trying to do. There was excitement around it, people were constantly interested in how it was going and how things were progressing. And I feel kind of like it takes a village.

Certainly, when you’re going to do something like that, when you’re birthing a business and creating something from nothing, it’s invaluable to have a network of friends and family who get what you’re trying to do, who are supportive. And let’s face it, who understand when you have to miss that family reunion, or when you have to miss the guys hanging out to play poker, because you’re working all night.

There’s a lot of sweat equity that goes into starting a business, and having people that understand that and who are willing to support you, and who bring you a pizza, when you can’t look up from your computer to stop, that kind of a thing, it’s invaluable. Not that you can’t do it without it, I know some people who have done it without it. But it certainly made that time of my life, a lot less lonely and a lot more bearable. To have the underpinning of really close friends and family who understand.

Dave Scott:

Yeah. No doubt in that you too, you hit the nail right in the head, it does take a village to grow a business. It does. You can’t do it on your own. And the more that you do try to do it on your own, the worse it becomes. So, I can totally hear what you’re saying on that point.

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Dave Scott:

So, talk to me about the why. What keeps you going? You’re doing all these things, you left your security, you ventured out. You had, sounds like a really great support mechanism, which is fantastic, very few people have that. Knowing all that, that’s the functionality of it. Talk about the forum, like what’s the why, what keeps you going everyday? When you put your feet on the floor at 4:00, 5:00, 6:00, 7:00 am. What keeps you motivated to keep going? What’s the why behind it?

Jason Etheridge:

Yes, so really, as we mentioned what our mission is, is an outpouring and a flowing of my personal mission in life. And so, I love to come to work every day, I’ve had this conversation with other people who are like, “Oh man, I hate my job, or I wish I didn’t have to work or I wish I could change careers.” A lot of these things. And I my heart goes out to them because I recognize that not everyone gets to love their job. It’s certainly a benefit and you certainly can use a job to pay for the things that you are passionate about in life.

So, there’s a model for that as well. But in terms of me, I get to get out every single day and come to work and do something that I love. And the other thing that makes it really possible is, I get to surround myself with phenomenal people, people who get our mission. People who are all in and engaged in helping us to get further or faster and to do great things. Literally, I’m looking right now, if you look above my door in my office, walking out into our kind of bullpen area, it is the word serve.

And really, what I’m passionate about is serving other people, I’m a servant at heart. I love helping other people, I love that feeling that you get from knowing that because of you, someone’s life was made better. And so, that’s why I keep doing it. And as long as Logic Speak gets to do that, and as long as I get to work with really phenomenal people, who really make this place work, then I’ll keep doing it. There’s no reason not to.

Dave Scott:

That’s awesome. Man, looking back over the last 14 years, there’s got to be some points every once in a while, where you just put your foot up or feet up on your desk or whatnot and looked back and said, “Man, we’ve really accomplished a lot.”

Jason Etheridge:

That’s true.

Dave Scott:

That’s awesome.

Jason Etheridge:

And it’s one of those things, so funny you mentioned that. If you’re not careful, especially as a small business when things are really, really fast and it’s so fast pacing, everything is changing and moving so quickly. One of the things that I talk to budding small business owners, or people who’ve been in the business like a few years or certainly, my wife and her company, is that you have to take that time to look back. Not all the time, because we all want to advance, we all want to progress, we all want our businesses to grow. We all want to take over the world, we want to succeed.

But you’ve got to have that time, that really still quiet time, to look backwards and see how far you’ve come, because if you don’t, like we talked about before, it is lonely and it gets daunting, and what is it all for? And is it all worth it? But if you can stop and look back and see how far you’ve come and what you’ve accomplished, then it will give you momentum and it will propel you forward to go further. It’s kind of losing weight, like you lose weight one pound at a time, when you look up and you’ve lost 30 pounds and you see somebody after six months, and like, “Men, you’re so skinny.” And you’re, “Well, I feel like I’m the same as I was.”

But that’s because you don’t see those small increments of investment over time. Same thing, you have to look back to be able to appreciate.

Dave Scott:

I know firsthand how tough it can be to run a business and own a business. Let’s talk about some of those struggles, some of your peers might have delivery struggles, maybe some of your clients have left en masse, hopefully that hasn’t happened to you because that sucks when it does happen. Talk to me about some of the more prevalent struggles that you’ve worked through over the last few years.

Jason Etheridge:

Sure, absolutely. Certainly, one of the struggles, when I bought the company outright, the first thing I had to do was evaluate everything that we were doing. And also the excitement around buying out the company and the single vision, and the single voice, casting vision. There’s an initial uptick for your company in terms of additional clients and growth and that kind of thing. We found ourselves, our client base and our revenue grew faster than our internal maturity and systems were growing.

And so, what that causes is, overwhelming your people, overwork, constant frustration with your clients who love you and want you to do what they need you to do, but if you can’t get to them fast enough at the end of the day, they’re going to find someone who can. And so, we really have a crisis of maturity back in those days, it was about, I guess, now five years ago. We really had to look at how we were doing everything that we were doing, what systems were we using, are they the right systems, are they going to propel us forward? Or are we suffering?

And the way I always said to my employees, if we had continued down that path, we would have imploded. Because we would have never been able to keep up and all of the growth that we’ve been experiencing, would have eroded, not overnight, but certainly when we weren’t able to keep up.

Dave Scott:

And that is so important to understand that early on, to work through some of those struggles because to your point, if you don’t, the wheels will come off the bus very quickly.

Jason Etheridge:

And we have experienced that. You mentioned that kind of mass exodus, the way I’ve said it to my employees, is that, “If you don’t handle your overwhelmed problem, your customers will handle it for you, they’ll leave and you’ll be less busy. It just might not be the customers that you want to leave that are going to leave. And so, you should do that again, intentionally and decide which customers are the right customers to work with, and which ones aren’t or else they’ll pick for you.”

Dave Scott:

One of the things that we do, is we focus on building a good clear persona, like, what are the problems and the pain points that we solve overall, for who we think are ideal prospect is, and our ideal partner is. And then we also identify who isn’t, because you don’t want to be wasting people’s time, going back to being intentional, like we talked about earlier. To your point, you have to be you have to be willing and be careful to understand that everybody is going to grow in certain respects, and you have to be just cognizant aware of that.

Jason Etheridge:

It’s who you choose not to work with, is everybody as important and sometimes more important as who do you chose to work with. I think a lot of times we forget that, and we’ll take whoever will pay us, but if you’re spending time on companies … We call it fitting them into our box. We have an ideal customer and either customers are moving toward that box and getting in that box or they’re already in that box, or they’re moving away.

And if they’re moving away from our box, we need to help them find the right company to service them because we are not that company. And that’s critical because it will allow you to focus your margin on the customers that do fit your model, that do recognize your value, that do participate in the maintenance of their own systems and they see the value of managed services. So, I can’t echo that strongly enough.

Dave Scott:

So, automation is critical to any business as you know, talk to us a little bit about the processes that you’ve automated and also talk about some of the tools that you use as well.

Jason Etheridge:

Sure. Well, and that kind of dovetails is really nice where we were when I bought the company. When I bought the company, we were using our own custom developed help desk solution, which again, worked well for what we did, but it only did two things really well as opposed to the entire landscape. And so, we did that for help desk, and then for billing, we literally manually entered invoices into Quickbooks every single month.

I mean, literally talking about inefficiency. That’s why I say, we were literally imploding, we could not keep up with the growth from a financial perspective, from a billing perspective, and certainly from delivery perspective. The first thing that we did was we chose a new PSA, a Professional Services Automation tool. We looked at all of them, because I’m a systems guy, my background, which we haven’t talked about that I actually went to school to be a developer. I loved softwares, kind of liked Bill Gates in that way, software kind of will take over the world.

But anyway, I looked and it came down to me to ConnectWise and Autotask, I know people who love both and I certainly would never speak badly of either one. We happened to be an Autotask shop, but it was really the key, it was a foundation of our desire to become a systems and a process focused company. And then we started to build everything on top of that, we layered on and we meant to do our automation from a patch management and monitoring and management perspective, and that was critical. So, we early on we worked with Hound Dog GFI Logic now SolarWinds and that was kind of our platform.

And then we recently have migrated to Autotask Endpoint Management, because we really believe in that single pane of glass, and then I feel like Autotask has a compelling story with the tight integration that they’ve made in the whole center stage platform. We did that, then and just to kind of ConnectBooster a little bit. I was at Autotask Community Live, I forget how many years ago, and one of my buddies there, who’s also in Autotask PSA user and he’s like, “Hey man, have you heard about Connect User?” And I’m like,” No, what’s the ConnectBooster?”

I’m like, “No, what is ConnectBooster?” And he’s like, “Oh, let me show you.” So, he logged into his own ConnectBooster portal to show me the solution and the fact that it integrated with Autotask, and did integrate with Quickbooks. So, that now we can generate invoices out of Autotask, like it automatically go into Quickbooks. And oh, by the way, your customers have a place to log in and enter payments into their ACH information or credit cards. And from a billing automation perspective that was the final solution in the loop, the closing loop of working the time, billing the time, sending it to clients and then getting paid for it.

Dave Scott:

That is awesome. How does the automation of those tools you talked about Autotask, some of the other automated tools, obviously ConnectBooster is one of those. How have they helped your business grow? What have they done for you all internally?

Jason Etheridge:

The real magic, if you were behind many services, is to be able to disconnect the value that you provide to your clients, from the hours that a human is putting, what I call jokingly, putting fingers to keyboard. Essentially, you want to transform the value to the customer in up time, efficiency, productivity, ultimately profit for them, and how well you are automating what you do. Or how you do that, is in automating everything that you can use.

So, instead of having someone manually push the button every time, you write a script to do that, you use RMM to install software, you use ConnectBooster to automate people’s payments, you use your Autotask PSA or Connectwise to send out invoices, and to automatically put them in your billing or your Quickbooks software. Ultimately, automation, the elimination of repetitive or redundant tasks, helps you to be more efficient, which in turn helps you to be more profitable.

So, you’ll be able to take on more clients and add more revenue, without adding headcount and staff, and those staff that you do have, will be able to accomplish the value that you provide to your clients much more quickly and much more efficiently.

Dave Scott:

I love it. That scalability is huge as you grow and it sounds like you’re figuring that out.

Jason Etheridge:

At the end of the day, if you don’t do that, if you continue to do things the manual way or what I call the brute force way, you will grow, and you will succeed, and you will have success, but it will be much slower, and you’ll only be climbing the rungs of the ladder one step at a time. And what I mean by that is, I climb up the rung, I get a new client, I hire another employee. So, then I have to climb the rung up, hire another employee, I get a few more clients, I hire another set of employees.

And so, you’re keeping the business going, but are you increasing the value at the bottom line? Or are you making talk about your enterprise valuation? Are you making your business more attractive? Or are you increasing their value inside your business, the owner’s value? Are you doing that or are you literally just taking money from clients and handing it to your employees. Money from clients, handing from your clients to your employees. If you’re doing that, that’s not increasing the value of your business.

Dave Scott:

Plus it’s that much more stressful like, why would you want to put yourself through the ringer if you don’t have to everyday? You know what I mean? I’ve always baffled my mind. And oftentimes on my own worst critic too. So I say that tongue in cheek, so, take that with a grain of salt. But man, it’s like beating your head against a concrete or a steel beam. It’s like, why would you continue to do that if you don’t have to? And that’s the value of creating something that’s scalable and flexible and that’s great.

Jason Etheridge:

And let’s face it, it’s a lot easier to be much smaller, if your net profits are going to say the same, or the value of your business is going to say the same, just be smaller. That’s a lot less stressful.

Dave Scott:

It is, isn’t it? I was talking with a friend of mine recently, his company is exploding with growth and he’s like, “Dude, things are so stressful, my business partner and I are fighting all the time, and there’s three of them.” and he’s like, “I’m going to cut one off the business and the other one is just not cutting it.” And he’s like, “I wish I would not have grown to be this big.” They’re pushing like about 20, somewhere between 25 and $30 million in revenue, they have couple of hundred employees and he’s just taxed. He’s burnt out man.

And I was listening to him and he’s like, “I wish sometimes that I would have just stayed smaller, like I wish I would have been that soloprenuer, that unemployed digital nomad, so to speak, where I had myself in five or 10 employees and built a really nice nest egg.” A ‘lifestyle business’ and done it that way, because as you grow, as you know, it’s almost easier to stay small because of the challenges that come as you grow and it’s not just one, it’s like half a dozen that will hit you at the same time.

It’s hiring challenges, it’s funding challenges, it’s how you write off expenses challenges, it’s payroll issues. And do you do your payroll differently, it’s creating a benefit structure that hires good talent or not. It’s all those little things, it’s your marketing engine. The smaller you are, you can take referrals. You don’t have to necessarily be really awesome at sales and marketing, but as you grow, there’s more competition. And you can’t do that, you can’t do the same things that get you from 2 million to five million, to get you to $5 million to $10 million.

And to be honest, you can’t have the same people that took you from two to five, to five to 10, to 10 to 20 million. And that’s another thing my friend is struggling with, he’s primarily hired a lot of his friends and not his family, he’s kind of been against that, but he has hired a lot of really close friends and some of these guys are very junior level. If we were to grade them like you grade the public school, like A, B, C, or D, some of them are B, C, D players.

And they’re bringing the rest of the team down, and they don’t have the skill set, and the panache, and the moxie, to get their company above that hump, to get them from 10 to 15, or 10 to 12, and 12 to 15, and 15 to 18, and 18 to $1 million in revenue. And it’s a really tough slog. So, I completely understand what you’re saying when you mentioned the fact that it’s almost easier to stay small.

Jason Etheridge:

I haven’t read it actually, but there’s this book, that somebody recently was telling about, the title of which explains exactly what we’re talking about. What got you here, won’t get you there.

Dave Scott:

Amen to that. It’s true.

Jason Etheridge:

That was a very kind of succinct way to play.

Dave Scott:

Yeah. And that is really hard. You know, you’re the CEO, you’re the guy. It’s really hard when you have to stare in the mirror in the morning and think, “Gosh, I really might have to let this person go. Or I might really have to transition myself out of this role.” And some of those decisions are extremely emotional, they’re extremely taxing, extremely stressful. But it’s like Marcus Lamone, has once told our CEO at IT Nation a couple of years ago, when he keynoted, he said, “Hey, I get all those things but that’s the bed that you made you need to sleep in it. And that is part of the territory in going along with it and if you don’t like it get out. And if you can slog through it, then it’s for you.” And those were truer words I don’t think were ever spoken.

Jason Etheridge:

Yeah. For sure.

Dave Scott:

So I wrote a blog piece a few years ago called The 31 Things I would Tell My Younger Self. It was one of the more therapeutic blog pieces I’ve ever written. If you could go back Jason, if you could talk to the younger Jason, what are some things that you tell yourself?

Jason Etheridge:

Ob boy, we don’t have the time for that nor enough therapy dollars. But, I think the biggest thing that I would tell myself, starting out my business again, and again, I talk to a lot of people in the industry we either are just starting out or really want to grow or just want to commiserate with someone who’s been there. And essentially, kind of the two things that I focus on most often that I would tell myself or that if I could do differently I would, would be to be intentional sooner in my life because it took me a little while to figure that part out.

To decide ahead of time where I wanted to go and what I want to accomplish. The other thing would be to read the book The E-myth, revisit it sooner so that I could understand the value of systems and process even when it was just me. And when I read it, it was literally like, “How does he know? That’s us. That’s me. We have that problem.” And essentially, the solution, not to give away the punch line but the solution is you should treat your business even if you’re just one person like it’s a franchise, like it’s Ray Kroc to McDonald’s, and make the hamburgers the world around the exact same way.

And if you can internalize that vision of systematizing what you do, no matter what sized company you want to have, it will make getting here a lot, a lot faster and a lot less pain.

Dave Scott:

Those are wise words that you tell your younger self. Well, Jason, what’s one thing that you’d do differently knowing what you know now?

Jason Etheridge:

In typical fashion, I’m not going to be able to do just one, but I’ll you one or two. So the one thing I would do differently is I would use a PSA quicker. We thought for a while we could write our own help desk system and sell that. And so we were kind of suffering from what kind of company we want to be? Are we a software development shop or are we an IT shop or are we a helpdesk shop or whatever? Are we a product company?

I think I would have abandoned our custom built help desk solution, or never even gone there. I would’ve gone with an Autotask or a ConnectWise a lot more quickly. That, I think, would have made a big difference. And the other thing that we did that was super transformational is that we found a coach or a consultant in our industry who helped us remake our service delivery process.

And ultimately, that has been one of the most transformational things that we could have done was to … Because at the end of the day, it was like whoever wants to take the tickets that you want to take, build the relationships with these people. But, “Oh, if this ticket comes, I don’t want to take it.” We really hadn’t focused on the maturity of how we deliver our services. And if we could have done that sooner, I think we would probably be double the size that we’re at now.

Dave Scott:

Yeah. And that’s part of the operating maturity model too. You have to understand some of those things sooner than later. I completely hear what you’re saying about getting a PSA sooner than later, I think that’s really great wisdom. Jason, what’s one thing if you’re talking to a young guy a young gal a young couple, whoever it might be. They’re just starting their journey as an IT business owner?

Lastly, what’s one thing that you would impart to them? What’s one piece, what’s one nugget of wisdom that you would share with them? Or one or two.

Jason Etheridge:

Yeah. And honestly, I think this goes back to the other thing I would tell myself back at 26 is, the business will take as much time as you’ll give it. So if you give it 80 hours a week, it will take 80 hours a week. If you’re going 100 hours a week, it’ll take that. If you give it 60 or whatever. So you need decide up front when you’re starting your business that you’ll set some guardrails for yourself around how much time you’re willing to give your business. Not that there’s not a season in life that you put in 80 or that you put in 70 or whatever.

But set some guardrails so that you don’t lose that connection to the outside world, so that you don’t abandon your wife, if you’re already married when you start your business or that you don’t not see your children grow up if you have small children when you start your business. Or like I was, when you’re single, that you don’t delay getting married because you don’t spend time dating because you’re focused on growing your business.

All those things are … Starting your business, growing your business. Those things are great and they need to happen. You’ll need to split and sweat equity, but you need to set some guardrails so that you don’t get a season of your life pass you by and then you look at one day and you wonder, “Where did all the people go?”

Dave Scott:

Yeah. That is fantastic wisdom and knowledge. There’s a couple of friends of mine that have passed away suddenly of cancer in the last year and it’s been really emotional for me, it’s been really hard, it’s been extremely eye opening. And one of the things I’ve heard time and time and time again is, “I regret not doing this. I regret not spending time with this.” You can make more money, you can buy more cars, you can meet more people, you can network more, you can always watch goofy cat videos and Tony Robbins videos on Facebook till the day is long, but you’ll never get more time.

So, go ahead and start, go ahead and do what you want to do. Go ahead and start that dream, go ahead and take that step, and realize that it’s often not as hard as we think it will be, versus what our mind portrays it to be, if that makes sense. So that’s great wisdom. And to your point, if you don’t do that, you’ll look back at 80 years old on your deathbed and go, “Dang, I really wish I would have done this differently”

Jason Etheridge:

Absolutely.

Dave Scott:

Jason, lastly, where can people find you?

Jason Etheridge:

Yes, so my website is www.logicspeak.com, and that is L-O-G-I-C-S-P-E-A-K.com. And you can reach me at Twitter @Jason_Etheridge, E-T-H-E-R-I-D-G-E. And I would love to interact with you guys. Certainly, shoot me a tweet or a direct message, and if there is anything that I can help with, I … The other thing we didn’t talk about is, I’ve done some consulting with other small businesses to, like I said, to kind of help them to move further faster. And if there’s anything I’ve learned along the way, I love trying to help small businesses not to make the same mistakes or make different ones, or maybe learn from some of the things that I’ve done.

If there’s ever an opportunity where I can do that, I’lI love to invest back into other small businesses to try and help them to do some things well.

Sponsor Message:

Before we end today’s episode, we’d like to thank our sponsors, 5 Step Marketing and BVoIP. Don’t forget to take advantage of your free one hour marketing strategy session with Josh and his team. That link, again, is 5stepmarketing.com/audit. That’s the number 5, 5stepmarketing.com/audit. And check out BVoIP if you’re looking to improve your telecom strategy. You can find BVoIP online at bvoip.com.

Dave Scott:

Jason this has been wonderful, man. I really appreciate it. I appreciate your time and thanks for coming on the podcast.

Jason Etheridge:

Thanks for having me. It’s always good to catch up with you.

Dave Scott:

And thanks everyone again, for joining us today on the Confessions of an IT Business Owner podcast, where we believe that healthy cash flow is critical to your business, automation is paramount, and building trust with your clients by looking more professional is ultimately going to help you grow your IT business. To learn a little bit more about our podcast and listen in and download all of our recent shows, visit us online at ConnectBooster.com/podcast. That’s ConnectBooster.com/podcast.

And to learn a little bit more about Jason’s business, like he has said, visit him at logicspeak.com and feel free to follow him on Twitter. Thanks again everyone for joining us on today’s show. We’ll talk to you soon.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Chris Schalleur, CEO of Christo IT Services.

Hey, everyone. Welcome to the Confessions of an IT Business Owner podcast, where we believe that healthy cash flow is critical for your IT business, automation is paramount, and building trust with your clients by looking more professional will help you grow your business. I’m your host, Dave Scott, and today we’re going to talk with Christo IT CEO Chris Schalleur about a lot of the things that he went through in terms of growing and starting his IT business.

Chris Schalleur:

If you’re chasing money 60, 90 days down the road, you’re kidding yourself. You just can’t operate like that, at least not sustained, because if you stub your toe, you’re done.

Dave Scott:

Here’s the podcast with Chris.

Chris Schalleur, sir, thanks for joining me. I really appreciate you taking the time today.

Chris Schalleur:

Awesome. Thanks for having me, Dave.

Dave Scott:

So Chris, we obviously know your name, since I just announced it to the world, but tell me the name of your company and where you’re all from. Give me kind of your baseball card stats.

Chris Schalleur:

Oh, sure. By day, we’re Christo IT Services. We’re a 15 person MSP just north of Philadelphia, about a half hour north of city hall. We’ve been part of the community since 1999. We started really focusing on managed services and all of that fun stuff in 2005.

Dave Scott:

That’s awesome. Are you typical Eagles fans, being that you’re from that area?

Chris Schalleur:

Yes. Yeah, it’s definitely Philadelphia pride in the office here. I’m probably a fish out of water. I’m actually a Dallas fan located in the Philadelphia area. Most of my staff has begrudgingly allowed me that while still rooting for the Philadelphia Eagles every once in a while.

Dave Scott:

Nice, nice. You love the team that America loves to hate.

Chris Schalleur:

Yes.

Dave Scott:

And your staff loves the team that you can thank us for your first round draft pick for, named Mr. Carson Wentz.

Chris Schalleur:

Yes. Yes, absolutely. North Dakota, absolutely. He’s been a very … He’s been a new life blood in the Philly Eagles, yeah.

Dave Scott:

Yeah. Brady, our CEO, and I talk almost daily about how the Vikings should have drafted him. That’ll be one we’re kicking ourselves probably for the next two decades on. So, Chris, we know a little bit about what you do and where you’re from. What was the passion behind starting your IT company?

Chris Schalleur:

I was always a computer guy. I always played around with computers. I was always the go-to guy growing up and in my first couple of jobs in chemical engineering and marketing and stuff like that. Eventually got to a point where I started doing moonlighting, and then started a business. I like to talk about people coming to work for me as one of my biggest honors. They put their faith in me and in the business and our passion for things. It’s always such a big honor to have somebody come and put their livelihood and trust in us. I always tell people one of the first gut checks, about two or three years into the business, was hiring that first person. I still consider that one of the biggest leaps of faith that I had.

Dave Scott:

Yeah, I love that. I think it sounds like, and just from knowing you a little bit outside of the four walls inside of ConnectBooster, you guys really pride yourself on that culture, right? That’s one thing I’ve always admired about you.

Chris Schalleur:

Yeah, we have some really long-tenured guys that have worked for me for 12, 13 years, all the way through a couple new guys on the team. But our average tenure is probably five or six years with the team.

Dave Scott:

That’s awesome. That’s awesome. Let’s transition a little bit. I want to know a little bit more about the day you left your old nine to five job for the opportunity of being self-employed. What was that like?

Chris Schalleur:

Well, it started with a pink slip, which is always a great start to any story.

Dave Scott:

Right?

Chris Schalleur:

I was one of those huge startups that went from 50 person company to a 300 person company and then a year later they were back down at a 50 person company again. I had been moonlighting, so I had already … We just went for it. Funny enough, I think it was almost 60 days later we found out we were pregnant with our first one.

Dave Scott:

Oh man.

Chris Schalleur:

It was always just a gut check there, which happens throughout the course of anybody’s [inaudible 00:04:56] participation in this journey.

Dave Scott:

Yeah. That is stressful. Holy cow. So you were moonlighting, you got the pink slip, but let’s back up a little bit before that. When did you first have the notion that you wanted to be self-employed?

Chris Schalleur:

I’m the son of an entrepreneur.

Dave Scott:

Okay.

Chris Schalleur:

So it was kind of cooked into me, because my father was working out of a fourth bedroom up in the upstairs and having clients visit and phone calls and things of that nature. He was staring an accounting practice up. So I can remember just being raised in that house of this is important. My mom worked for my dad at the time, as well, so I was kind of incubated into that entrepreneur mindset from a very early age.

Dave Scott:

Yeah, that’s awesome. So what was your perception, as a little kid, watching your parents live through that and go through that professionally? Because for my kids … I have two daughters, and they’ve seen me do both. I’ve worked for large Fortune 500 companies where I punched in, punched out, eight to five, Monday through Friday. I was simply a number in the HR department, and I had an employee number and a badge and everything like that. They’ve also seen me struggle and work 60, 70, 80, 90, 100 hours a week some years, so it’s been crazy for them. One of my daughter’s perceptions is, “Hey, this is really cool, Dad. I’m glad you’re doing it.” The other one’s like, “Hey, this sucks. This is hard. I don’t want to do this and I begrudge you a little bit because you did this.” So what was your perception, growing up in that environment? What was that like?

Chris Schalleur:

I don’t remember having any aha moments. Maybe when I got into my early teens, you get into middle school or high school. But as a younger kid, it was just the way things were. Dad works 80 hours a week. I remember getting in trouble once when I was a little kid when I said Dad was a workaholic. I didn’t know what the term meant. I just thought it was … Somebody said something on TV and I said … I was over at a friends house and that got back around to Mom real quick, of course, and, “What do you mean by that?” I was like, “I don’t know, I just thought it was funny.” “You don’t say that.” “Okay, well.” But it was just kind of how our house was. I mean, this was … You work really hard. We always had great times together and everything like that, but it was …

There was no aha moment probably until high school, when I think what started to click for me was … I was a swimmer and had swim meets and stuff like that, and my dad as always there. So part of what clicked for me was having that flexibility as an entrepreneur, as a business owner. He was working so that he had that flexibility to show up for a swim meet in the afternoon. That kind of clicked for me as what I want to do for my kids.

Dave Scott:

Yeah. I think, for a lot of self-employed people that move into the season of entrepreneurship, because there is a difference. There’s a Carol Roth book … She’s a businesswoman and an author. She wrote the book The Entrepreneurial Equation, and she talks about the difference between somebody being self-employed and having one or two employees versus somebody who’s an entrepreneur. But I think the freedom that either one of those categories, either one, a person who’s either self-employed or entrepreneurial fits in. I think the freedom that you get, that being that digital nomad, so to speak, or unemployable, as I like to call it. I think there’s a lot of value in that, in not being tied down. Yes, you have to work. Some weeks it’s 40, 30, 40, 50, 60 hours. Under 40 or 50 probably doesn’t happen, truthfully speaking.

Chris Schalleur:

Sure, sure, sure.

Dave Scott:

But I think anything over 70, 80, 90 hours a week is probably the norm. But there’s a lot of value that comes with that, right?

Chris Schalleur:

There is, as long as you’re not lying to yourself, Dave. I mean, you’re going to go through spurts, especially as the business hits certain tiers, as you get out of that hundred, $200,000 tier and you get into the three or four employee tier. Then you get into half a dozen tier. You’re going to hit those tiers where you’re going to have to put a sustained time of, “I don’t see any daylight ahead of me.” You’re going to hit those black periods, but as long as you keep true to yourself and that, “I’m going to get through this, and this is why I’m doing this,” and you’re not lying to yourself that, “Well, the next level is just [inaudible 00:10:04] the next level,” you’re going to be okay.

Dave Scott:

What gets you through all that? Talk to me a little bit more about that, like what gets you through those seasons or those periods?

Chris Schalleur:

For a couple of those periods I had the blessing of having my wife work with me. A lot of people kind of go, “Oh my god, how was that?” I was like, “Well, it had its bad days and its good days.” Because you’re with each other all the time, but at the same time, when you get home at night, you know how the day was already. If it was a bad day, you both had it, so it was experiencing that together. So there was a lot of positives that came out of that. Since then, my wife’s gone back to quote-unquote her “real job” or her real career, but it is working with my team in the office that … Hey, this is what we’re working on now. That gets you through those solidarity pieces. Then coming home and obviously getting a hug and kiss from the wife and the kids is obviously going to get you through just about any bad period in your time.

Dave Scott:

Yeah, no doubt, yeah. Yeah, amen to that. Truer words have never been spoken. Tell me the story of what draws you back into your office every day. You put your feet on the floor and realize, hey, this is a new day. What draws you back to it every day?

Chris Schalleur:

Over the past year or two we’ve been working on new cloud solutions and new ways of talking to clients about technology. Since we’re obviously in this industry that’s constantly changing, having that something new to talk about with people. Or, everybody’s seen the headlines recently with cyber security, and having that ongoing conversation of like, “This is constantly evolving and I have something to tell you about. I have something to talk to you about.” That’s really kind of what really gets my jets firing.

Dave Scott:

That innovation piece, that creativity piece, it sounds like, is really important to you.

Chris Schalleur:

Yes, absolutely.

Dave Scott:

Yeah. Looking back on everything over the last, what, 14, 15 years of business, you got to put your feet up on the desk every once in a while and go, “Man, it feels good to be here at this point that we are today.”

Chris Schalleur:

Every once in a while. I’m a little bit of a blushing boss on that kind of stuff. I get thank yous from clients and I get thank yous from staff and stuff like that. I appreciate it, it’s always appreciated, but if we’re not constantly having that conversation, having that, “Here’s what value I can bring to the table,” it’s going to be short-lived. I kind of always have that whisper in the back of my mind of, “We got to be bringing something new, otherwise we’re yesterday’s news.”

Dave Scott:

Yeah, no, I hear you. I think I’ve never met an entrepreneur that likes self pats on the back. It’s just not in their DNA. To your point, if you’re not sleeping, you’re working. If you’re not working to think about something innovative to bring additional value, there’s something missing. So I hear what you’re saying on that.

Chris Schalleur:

Yep.

Dave Scott:

I know firsthand how hard and tough it can be owning and running a business. Talk to me about some of the struggles in owning your managed service practice. You talked a little bit about the struggles of maybe working with a spouse, or in your case it sounds like it was a blessing, the struggles of hiring good people, and things of that nature. So talk to me about one or two things that’s hard about running and owning a managed service business.

Chris Schalleur:

Part of it is what we were just talking about, keeping up with everything new, because it is so constantly changing. One of our biggest struggles, in the beginning, was to come up with our quote-unquote “stack”. This is what we’re going to bring to the table. Because it’s so easy to get distracted, and we didn’t have a value internally for what consistency meant to us as an organization. What I mean by that is, well, we had these eight different solutions, as opposed to, here’s the value in just having these two solutions and here’s the value in just having this one solution. That was really one of the biggest struggles, is bringing all of that together. It took literally years to finally consolidate all of that and have one solution stack that we’re going to be able to provide to our customers, and it was absolutely invaluable.

Something else that we really kind of worked on. We had a number of acquisitions through the years, and that didn’t help on the consistency, because when you acquire things you don’t really have the luxury of bringing in exactly everything as you have it now and as you would want it. I’ve talked numerous times in numerous pieces about all the different acquisitions that we had, and all the pains that go along with assimilating those clients as well as assimilating the staff that comes along with them. It was really a growing point for both my business partner and myself as far as who we were as leaders and what we wanted to become.

Kind of the most recent struggle for us was we finally had a sit down with ourselves and said, “Look, we can’t continue to grow the way we’re growing and still be able to provide service to time and materials clients.” We had a number of clients that had been with us since the very, very beginning, and we finally just had to have personal sit downs with them and say, “Look, we’re not going to be the … I know you put your trust in us over the years and when we were little guys, and you helped us grow, but unfortunately, we’re moving on from this and we’re going to need to move on from you as a relationship, as a vendor.”

Dave Scott:

Interesting. So it sounds like you guys have gone through a handful of M&A deals, or merger and acquisitions, where you’ve had some struggles not only from a resource perspective but, like you talked about, the post-merger and acquisition tasks. Like how do you assimilate people from their culture to your culture? Do you keep some of the team members? Do you not? What’s the revenue stack looks like? Do you offer more product offerings? You touched on that a little bit. So talk to us a little bit more about that, like what was your overall opinion of M&A? Is that something that you have a bit of a sour taste in your mouth about, or is it something that you’d recommend to other peers?

Chris Schalleur:

Oh, so many lessons learned on that one, Dave.

Dave Scott:

We’ve got time, so go ahead and regurgitate everything.

Chris Schalleur:

Here’s the first one, and this actually relates to your world. One of the biggest lessons learned was have a very blunt conversation about invoicing, and how companies say, “Well, we invoice on the first of the month and everybody pays on the 30th of the month,” is a very different conversation from everybody pays before the first of the month. Very quickly with one of our acquisitions in 2009, we quickly ran aground almost in the first 30 days because the cash flow wasn’t there on day one on the M&A. That was horrific, to the point of where was that $100,000 that we were expecting? Well, we’re not going to get that for 30, 45, 60 days from now. That was quite a gut check there.

Second lesson learned that I had was really that the acquiring company really needs to be using some sort of system, a PSA of some sort, because having Excel and Calendars as a mechanism for delivering their IT services is … You can’t know what value you’re getting if the company’s not using a system.

Dave Scott:

Right, yeah. Did you acquire somebody who wasn’t using a PSA at all?

Chris Schalleur:

Yeah, actually, two of our biggest were Excel and Calendars. They had hit the point of four or five employees and were hitting those points that I’m sure a lot of the listeners have had where you reach that point and the wheels start coming off. You can’t manage beyond that point. So they were on the point of making the decision on investing in some sort of system, and instead decided to get out of the business.

Dave Scott:

Wow, interesting. So invoicing was a huge issue post-M&A because cash flow wasn’t available, based on maybe the financial due diligence, and the acquiring companies didn’t really have a good process, or a software tool, I should say, for delivery, right?

Chris Schalleur:

Yes. Those were absolutely huge for us. That cash flow was a very, very tough lesson.

Dave Scott:

Yeah. Being shorted a hundred grand or whatever that dollar amount is, is not … That’s not a stressless situation, right?

Chris Schalleur:

No, that’s a big oops.

Dave Scott:

Yeah, right, exactly. Did you guys go through an M&A advisory firm, an M&A firm? Or did you use an attorney or a broker? How did you go through that process?

Chris Schalleur:

When we first looked at M&As … We’ve done six of them throughout the course of our company lifetime, going on 20 years now.

Dave Scott:

Okay.

Chris Schalleur:

Most of them have been small, one, two, three person shops. They were all done with an accountant and maybe a couple hours with a lawyer just writing something up, and it was a pretty cut and dry kind of thing.

Dave Scott:

What was the post-acquisition like? Was there a plan, or was it just, “Hey, here’s the keys to the new operation with all these new employees,” violent shove in the small of your back down a steep hill, and away you go with lots of bumps and bruises along the way? Or was there a post-acquisition strategy that you all had in place by working with an M&A team?

Chris Schalleur:

The plan was always to have sit downs with each of the clients, sit downs with each of the new employees. Eight times out of 10 that worked.

Dave Scott:

Okay.

Chris Schalleur:

Sometimes the wheels came off just from a … The clients that you’re acquiring have businesses and timetables and things that are going on. Your interruption of that has very little validity to do with their day. Most of the time it worked okay. Our biggest lessons learned was that we didn’t get granular enough with the acquiring value companies.

Dave Scott:

Ah, got it.

Chris Schalleur:

When you’re our size … I mean, once you get up into the millions upon millions of dollars, that’s a different story, but typically in our MSP world you’re dealing with a couple million dollars and less companies. This is my biggest lessons learned in 20/20 hindsight, is there’s absolutely no reason why during the due diligence process and evaluation process, you can’t go line item by line item, company by company, and assign a value to each of those companies and what they are in terms of value that you’re going to be paying for, what the expectations are. You can assign a different plan to each one of those companies, based on what their needs are, based on what the history is, upcoming projects, what the owner of the business that is that client. You can get that granular. There’s no reason why you can’t.

It is going to take a little bit more time, but it’s absolutely … If you lay that out during the evaluation and the due diligence process, you will come back in spades as far as being very, very clear with both who you’re buying, the owner of the company that you’re buying, as well as yourself and not peanut buttering the value over however many companies that you’re buying.

Dave Scott:

Yeah, no, and I think you hit the nail on the head when you talked about doing and going through the due diligence process. What I hear often in M&A world is people that go cheap regret it. Don’t go cheap. Spend the proper amount of money and time to do it right, up front. Go through that really fine … Take a fine toothed comb to the due diligence process to make sure that everything is set.

Chris Schalleur:

Yeah. Us being entrepreneurs, we have a tendency to kind of gloss over those details.

Dave Scott:

Right.

Chris Schalleur:

What you want to do is you want to bring those detail people to the table with you, those lawyers that are going to go over every single line item, because we have a tendency not to.

Dave Scott:

Right.

Chris Schalleur:

We have a tendency to rely more on gut check and looking in the eyes of somebody and handshake and really what your feeling is. When you go to that table, this is not the place for that. You want those accounting lawyer people by your side that are going to be those detail people.

Dave Scott:

Yeah, no, I think that’s really good wisdom.

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Dave Scott:

Let’s talk about the value of automation inside of your business. I think we all can agree that it’s critical to the health and success of any IT company. Talk to me a little bit about what processes and systems that you’re automating today.

Chris Schalleur:

A lot of what we automate now really comes from our ConnectWise PSA system. It pretty much runs our entire business. It runs everything from the ticketing to the invoice. A lot of people in the MSP world are familiar with it, but we’ve really automated a lot of that to take away the need for more overhead in our business. We are really kind of expense conscious in our MSP, so wherever we can avoid having a person do something, even if it only gets us 80% of the way there with automation, we’re going to automate it rather than having somebody sit there and do the busywork, for lack of a better term. We really, really abhor throwing a warm body at something. We’re really going to automate the hell out of it, instead.

Dave Scott:

You talked about PSA. What sort of things are you all automating through your PSA? Are you automating everything from delivery to support tickets to quoting? As you know, we use ConnectWise here at ConnectBooster, and we love it. We use it for quoting, our sales guys and our marketing team uses it for quoting purposes. What are some of the other things specifically that you’re all automating through that?

Chris Schalleur:

We board, B-O-A-R-D … We board the hell out of just about anything that we can compartmentalize in the business. We automate everything from the quoting process … We actually use the ticket system for our sales pipeline. We use activities and stuff like that, and my salesperson does all of that. But once we get an appointment, once we have somebody who wants to sit down and meet with us and we’re actually going to spend some time with, that moves into a ticket. We start automating that process all the way through a qualification state, through a tech assessment, automatically attaching those checklists and due diligence processes during that courting phase and vetting phase for a new prospect, all the way through to the quoting phase and getting that proposal in front of the prospect and getting them to sign.

Dave Scott:

That’s the beauty of automation. You talked a little bit about the why that you’ve done it. What do you feel like the improvements have been by automating a lot of these what I would call manual tasks or manual time sucks?

Chris Schalleur:

In most small businesses, you typically have some sort of champion of XYZ, whatever it happens to be. This person knows how to do this, or this person knows how to do this. One of the really big benefits that we’ve seen out of the automation of it is that it doesn’t … If that person goes on vacation, or they’re just not in that day, that excellence that they have, those little nuances, can be part of that automation, and it can be done the same way, the same excellent way, by any member of the organization.

Dave Scott:

Yeah, and I think that efficiency speaks for itself, doesn’t it?

Chris Schalleur:

Yes. You can’t put a price tag on that, because once it becomes part of your culture and that, it’s just how things are done. The expectation level just rises, and that’s your new baseline. So new people coming into our company, new employees, even new customers, you get that wow factor.

Dave Scott:

Yeah.

Chris Schalleur:

You can’t put a price tag on that. Well, on day one I had this, this, this, and this. It just happens no matter what. If somebody’s out sick, if somebody’s on vacation, like I said, it still happens. As much as they’re awesome, you don’t have to rely on human beings. You can rely more on your processes and allow the team to get things done instead of an individual.

Dave Scott:

Yeah, no, and I love that. I think, too, and I have this conversation a lot with Matt Bitzegaio … He’s our chief technology officer here at ConnectBooster. We often talk about the value of either being small or embracing the chaos that’s going to come with growing as a business. One of the things that it’s easy to do is stay small so that you don’t have to automate and you don’t have to do a lot of these things so that you can scale and grow your business, because scalability is key as you grow. If you’re not, that’s a huge roadblock. But as you grow to your point, you can’t rely on awesome human beings to do a lot of the things that you did at 2 million or $5 million. Once you get to 7, 8, 9, 10 million and 15 million, 20 million in annual revenue, you really have to take a focus and take a step back and remove people from certain functions so that these things can be automated, so that you can grow and scale without people jumping off the rooftops. You know what I mean?

Chris Schalleur:

Yeah, yeah. One of those ones is in your world. I mean, accounts receivable is … You could pay somebody to sit there and poke people all day long. Why? Why not automate that? Why not have something that pokes people automatically? I mean, I’m sure most PSAs do, but ConnectWise has an awesome university article of set up an accounts receivable board, set up automated statuses, and just let it run.

Dave Scott:

Yeah.

Chris Schalleur:

You might cringe at that, and I get that. When I first heard this, I had that cringe factor of, “Well, it might rub people the wrong way.” Nope, get past that.

Dave Scott:

Really? That’s not truth? That’s not fact?

Chris Schalleur:

When I first heard this, “Well, you got to treat your clients with kid gloves. Don’t ask them too often to get paid,” and everything like this, and always had that cringe moment with people. You got to get past that. You got to get past your own head trash of you provided services or you’re going to provide services, that they need to pay. Automating that is no way going to offend anybody. It just isn’t. You’re providing a business transaction and, “Oh, by the way, here’s your invoice.” A couple days later, “Oh, by the way, I haven’t heard anything from you, here’s your invoice.” I mean, there’s no reason why you can’t poke people like that.

Dave Scott:

Right. I love it. I think sometimes we like to make things harder and like to think that they’re harder than they actually are.

Chris Schalleur:

Yeah. Unfortunately, I’m probably … I don’t take offense when I get a notice in the mail. Why would any of my clients?

Dave Scott:

Right. Me neither. I actually think it’s a point of pride, because it tells me that they’re focused on their customers and their followup is good. If I didn’t ever hear from somebody and I just got a random invoice like six months …

Well, here’s a story. About 10 years ago my wife and I were selling our home. We got into a bit of legal trouble, not anything on our end, so I hired an attorney. Everything worked out fine in the end. Everything was hunky-dory, albeit during my vacation, which was awesome, right? My week and a half long vacation, I’m having to deal with attorney phone calls and going back and forth. But all that to be said, everything worked out just fine in the end. But, literally seven months later, I get a bill, and we didn’t get a bill from our attorney. It wasn’t a lot. It was like a couple thousand bucks or whatever. And I’m like, “This guy has really crappy followup.” He is a bulldog of an attorney and I’m grateful that I worked with him and he’s awesome, but he is not that talented and that smart to be above good customer service.

As a consumer, as a customer that … and as somebody in marketing like I’ve been for a long time, I really pride myself, and I try to filter things through the lenses of good customer care and good customer service. When that doesn’t happen because people don’t pay attention to meticulous details through good billing or good invoicing, it just kind of shows up as a blight.

Chris Schalleur:

It does, and I think that’s probably one of the biggest struggles in our little IT community, is that 99% of us have come out of the technical end of things. Providing that service, saying thank you to somebody, shaking their hands, fixing their problem, making their day better, and then leaving wherever it happens to be, either remotely or in person. Then exactly kind of the story that you … All of the other stuff happens. The invoicing, staying up at night trying to generate your time sheets and trying to do this and that and the other thing, and it isn’t done as well because less importance is placed on it. Because most of us came out of the tech field and that’s where the priority lays, is fixing the problems, not necessarily putting on the best face on your invoicing process or your accounts receivable process, because it’s typically an afterthought, for lack of a better term. But it really does … It’s as much as your presentation as how quick your service is and how good your service is.

Dave Scott:

Yeah, I completely agree. I wrote a blog piece a few years ago. It was pretty therapeutic. It was called The 31 Things I Would Tell My Younger Self. If you could go back in time and you could talk to your younger self, after seeing what you’ve accomplished today and a lot of the victories and even defeats that you’ve had, what would you say? What sort of wisdom would you impart on a younger Chris?

Chris Schalleur:

Wow. Stay away from the fried foods. No. Probably the biggest thing would be similar to what I had spoken about earlier. Get out of your own way. Stick with what you’re good at. As much as it pains everybody to part with that money, hire somebody to do that job, either a 1099 or an employee. Because they can, regardless of what you think, they can do it better than you. Because your part-time brain is just never going to be as good as somebody whose sole focus is to do that.

Dave Scott:

That’s good wisdom. Knowing what you know today, would you do anything differently? I know you talked a little bit about M&A. Would you maybe not go through an M&A deal without doing one thing, or would you and to hire this sort of person? Or would you hire this sort of person, or would you do one thing differently? What’s one or two things that, knowing what you know today, that you’d do differently?

Chris Schalleur:

I would get more into the process earlier. We relied a little bit too much on that individual excellence that I talked about earlier, where we put it down on paper as to why are they excellent? When they do blah blah blah for you, why are they excellent? Actually writing down all the little nuances of what they do and how they care. You have this fantasy, or I did at least, of, “Well, that’s some of the magic of what Christo IT is about. We have these wonderful people and they do this wonderful job,” and somehow, by writing it down, we were somehow going to kill the magic. I don’t know if I consciously or subconsciously thought this, but getting more into that process earlier would’ve absolutely been … If I could go back and whisper in my own ear, just write it down.

Dave Scott:

I love it. Lastly, what’s the number one point or message that you could drive home to any of your peers listening to this podcast today? Imagine somebody in your shoes, maybe they’re just starting out or they’re in the middle of a interesting season. What’s the one point or message that you would want them to hear?

Chris Schalleur:

I would actually have two. One, cash flow is everything, which is an easy one. It translates all businesses, but if you’re chasing money 60, 90 days down the road, you’re kidding yourself. You just can’t operate like that, at least not sustained, because if you stub your toe, you’re done. You’re going to have a major problem. So cash flow is absolutely everything.

The second thing I probably would highlight for everybody is to get granular within yourself. What I mean by that is, you can go line item by line item, you can go client by client, and get really, really specific about not only making sure that you’re providing the best service to them and going, “What do they need? What is their road map? How can I provide better consulting services to that client?” As well as granularity on your inside, for yourself. Are they a profitable client? Is there anything that we can do to get more efficiency out of that one client? We can talk about generalizations and things that overlap and umbrella the entire company, but it’s very rare that we have, once we reach a certain size, that we’re not going to that line item by line item detail and paying attention to those fine things. Because even if you squeeze just a little bit out of each one of those line items, it’s going to make a huge impact on the bottom line for yourself.

Dave Scott:

I like it. Chris, where can people find out more about you and your business?

Chris Schalleur:

I’m kind of a Facebook junkie, so I’m all over Facebook. ChristoIT.com. We have our cartoon characters there, so we talk about our unique selling proposition there and our different cartoon characters and what makes Christo IT different. That’s a great way to find out more about them, and on LinkedIn. If you could look up Chris Schalleur or Christo IT services, I’m usually on LinkedIn as well.

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Before we end today’s episode, we’d like to thank our sponsors, 5 Step Marketing and BVoIP. Don’t forget to take advantage of your free one hour marketing strategy session with Josh and his team. That link, again, is 5stepmarketing.com/audit. That’s the number 5, 5stepmarketing.com/audit. And check out BVoIP if you’re looking to improve your telecom strategy. You can find BVoIP online at bvoip.com.

Dave Scott:

Chris, hey man, I can’t tell you how much I appreciate you as a person, as a friend, and as a partner, so thank you so much for being on this podcast today.

Chris Schalleur:

Awesome, awesome, awesome. Thank you for having me, and always great to talk to you, Dave.

Dave Scott:

All right. Thanks Chris, we’ll talk to you soon, buddy.

Chris Schalleur:

Bye bye.

Dave Scott:

Thanks again, everyone, for joining us on the Confessions of an IT Business Owner podcast. Thanks again to Chris Schalleur, the CEO of Christo IT Services. If you want to learn more about the podcast, download the show and even the transcript, and if you want to take a look at the case study that we actually published about Chris and his company and the automation tools that he uses to grow his business, you can check all that out at connectbooster.com/podcast. Thanks again, everyone, for being on the show and joining you us today. We’ll talk to you soon.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Chad Lauterbach, CEO of Be Structured Technology Group.

Welcome to the Confessions of an IT Business Owner podcast, where we believe that healthy cashflow is critical for your IT business, automation is paramount, and building trust with your clients by looking professional will help grow your business.

I’m your host, Ryan Goodman, and today you’ll learn about some profound struggles related to owning and growing an IT business and how Chad Lauterbach, from Be Structured Technology Group, overcame them.

Chad Lauterbach:

Why would I make money for someone else when I can make money for myself and chart my own destiny rather than be on somebody else’s sailboat?

Ryan Goodman:

Here’s the podcast with Chad.

All right. Well, Chad, thank you for jumping on today’s podcast. Excited to learn a little bit more about you, about your business, and some of the successes and struggles that you had, and allow us to share that with the greater community.

Chad Lauterbach:

Definitely. Yeah, thanks for inviting me.

Ryan Goodman:

You bet. To kick things off, I gave up your first name. I’ll have you state your first and last name as well as your company name.

Chad Lauterbach:

Sure, yeah. It’s Chad Lauterbach, from Be Structured Technology Group out here in Los Angeles, California.

Ryan Goodman:

Well, you’re warmer than us in tropical Fargo, North Dakota. That’s for sure this time of year.

Chad Lauterbach:

Yeah. Yeah, not to speak of the weather too much, but it’s been crazy this week; it’s record-breaking heat out here by multiple digits, so no winter here, that’s for sure.

Ryan Goodman:

Beautiful. So, to kick things off in our interview, here, I’d love to have you tell us a little bit about your business and some of the passion behind starting it.

Chad Lauterbach:

Sure. Well, I’ll start with the passion, actually, ’cause I think the root of where people come from and how they started their business is always an interesting story.

I’ve always been interested in technology and how things work. I was the kid that was picking apart the Discman and the radio and taping stuff from the radio onto cassette tapes and using the camcorder. My parents gave me an old Yashica camera. I was always into figuring out how anything that had technology in it worked.

I was really lucky in that my parents had computers around at a very young age. I was born in 1980, so it was pre-personal computer era. Late 80s, early 90s was when most people started to have computers in the home, but my dad had a computer in ’84 or ’85, I think. He had this giant computer, and then we had a Commodore PET computer at home. So, I got to learn to program in basic on that thing when I was six.

Then we had the original Mac Classic and we had an IBM XT, so I actually got exposed to both platforms at their very, very earliest stage. We had a very first generation Windows 2.0 and then a Windows 3.0 computer.

I feel like it was unusual that my family had those around. They were mostly around for my dad’s work, so they weren’t play toys, per se, but he let me use them. I got a lot of exposure to the personal computing age at a really young age, which was great. I was always really excited and passionate about it. I ended up doing the things that kids do. Building my own systems, gaming, all that stuff as I got older and just always had a passion for technology.

Then I got really lucky, again, in that I got to turn that passion into a career really young. Between junior high and high school, one of my dad’s friends was a part owner and president of a life insurance company, so he gave me a summer job working in their IT department, working on an AS/400.

My after school job, when most of my peers were scooping ice cream in high school, I worked doing junior admin work. Basically help desk and junior admin installs and stuff at Mayo Clinic in Scottsdale, Arizona. Again, just total luck because I had some computer skills from a young age. I was able to jump in and actually get paid to do some work at a really young age doing IT stuff.

When I was 20, I got my first full-time gig and worked for other people for about five years in various capacities at a transportation company and health care company, building IT departments from the ground up for them. So, literally going from nothing to 100- or 200-employee companies, full server build outs, all that stuff.

Ryan Goodman:

Wow.

Chad Lauterbach:

So, yeah. It was crazy. I feel just really lucky with the opportunities that landed on my plate at a young age. Having had that experience, I realized, “Oh, I have a knack for not just doing work, but actually being able to understand business and being able to take something from a design and architecture phase all the way down to a build phase.” Which I still, to this day, view as one of my strengths, is being able to see something strategically and design and architect it. But I still, even to this day, can turn the screwdriver.

So, I know how to configure a switch on the command line, I know how to work on the operating system. I like that I know those things, ’cause when I walk in and talk to a client and consult them, I know I’m not shooting crap out there; I know that what I’m designing or telling them I know can be done all the way down to the configuration level, which I think you don’t always find in IT service company owners.

So, yeah, I started Be Structured in 2007 officially. I incorporated it. I’d been doing it, essentially, for a year or two before that. Then I’ve grown it to where it’s at today; about 15 employees and 50 or so customers. Went from doing the break/fix model 13 years ago to being the managed IT service provider that we are today.

Ryan Goodman:

It’s an awesome story. In fact, as I was listening to you and the path, not only was it … I wouldn’t say complete product of environment, but it was a saturation; it was all around you. But I don’t think there was another option for you, actually, which is a beautiful thing.

Obviously you’re very successful in that as well, and it sounded like you had some great mentors. Not only family, but also family friends were able to get inside of the business aspect of IT at a young age. Now here you are in the position you’re in as an entrepreneur, owning your own business, which is awesome. Living the dream.

Chad Lauterbach:

Yeah, and I would add to that, too, just in the luck column: My dad is not an entrepreneur. He worked in big companies his whole life, but a few of my dad’s friends and my uncle are entrepreneurs.

I learned a lot from them about owning businesses and how business operate and function, and my uncle’s still a mentor of mine. He’s an investor in a different company that I have. He’s somebody that I still talk to and rely on for that business-level advice, too. So, yeah, beyond just the technology that I got to mess around with, I did have mentors in the business space as well, which was cool.

On the technology front, I feel like most people that are successful in technology are a bit autodidactic. I feel the same way. My mom always joked I was staying after school in elementary school, offering to help my teachers with their computers, and I would charge them. I’d be like, “Hey, I’ll stay after school and help you with your computer for $20,” or whatever, and they’d be like, “Oh, okay, great.” They would pay me, and my mom was like, “Is that appropriate?” I’m like, “I don’t know. They gave me money, and I helped them with their stuff.”

Ryan Goodman:

You’re like, “It is definitely appropriate, trust me.”

Chad Lauterbach:

Exactly.

Ryan Goodman:

“I’m buying the things you don’t wanna buy.”

Chad Lauterbach:

That’s right.

Ryan Goodman:

I’d love to learn, as we talked about this story growing up around IT, technology, being the guy to take things apart, figure out how it works, and still being very knowledgeable of that, and now growing a team …

Why don’t we talk a little bit more about some of the wins that you celebrated in being the owner of a technology business? We talked about employee count, where you’re at with customers. What are some of those wins along the way that you can clearly call out and say, “This was a defining moment inside of my business?”

Chad Lauterbach:

Yeah, yeah. I struggled the first few years to figure out how to get the business off the ground, on its legs. I was doing break/fix and then I was starting to do some retainer contract stuff. I was struggling to find a business model ’cause I was like, “Well, I know I need to hire another full-time person.”

Especially when you’re real small; when you’re a one-person company, adding a second person is doubling your staff. It probably is not quite a doubling in payroll, to be quite frank, so it’s a huge undertaking, that first person you hire.

So, yeah, I struggled with it a lot in the beginning, and that’s where managed services really came into play. That’s when I was able to hire my first full-time person. I honestly wish I could tell you, I do not remember where exactly I heard of the managed services concept or learned about it. And of course, there were a lot of failures along the way. I bought junky PSAs and RMMs at first, trying to understand what I was doing until I landed on some good solutions.

But just getting into that model where I was selling people a flat-fee service and an outcome rather than selling hours was a total game changer because it allowed me to feel confident hiring somebody else, because I knew when my revenue hit X, I was able to do that.

That gave me the confidence to grow my business, and still to this day does. I look at the books and I know product sales, one-time service sales or setup fees, or anything like that. That’s all great, but that’s gotta be icing on the cake. Our managed services and our other types of services sales have to cover our regular expenses, including payroll. If they don’t, I’m not gonna feel comfortable hiring somebody. That’s still a gauge I use today, and that’s been probably the biggest win starting this whole journey.

Ryan Goodman:

Yeah. That’s a great win, and it’s a great feeling to have monthly recurring covering the base, so to speak. Then anything else is additive, and you can monitor growth and regulate growth based on at least that being one of the key metrics inside of the business.

Chad Lauterbach:

Absolutely, definitely.

Ryan Goodman:

Not everybody’s to that point yet, so you’re proof that this is a goal that’s completely attainable as long as you have enough drive, focus and attention to the details and the day to day.

Chad Lauterbach:

Yeah. Yeah, it definitely is. I’ve talked to guys that are trying to get started in the IT services space and oftentimes they talking about, “How’d you hire your first person,” and, “How did you get where you are today?” I always tell them, “Having some sort of recurring service model is critical to being able to do it.”

It’s not impossible, I suppose, to have an hourly service model, but I think especially in today’s environment, it’s gonna be really challenging. More of the firms these days that are gonna be the better paying firms, your financial services industry companies, banks, auto dealers, accounting firms, legal firms, anything that’s in that professional services territory, they’re expecting to pay a managed service provider a fixed fee. So, if you’re going in there with hourly, I think people are gonna look at you funny.

Yeah, you might be able to pick up Joe’s Auto Shop down on the corner or the convenience store or whatever, but I think you’re gonna struggle to stay alive with that type of business these days. I think large or small businesses or professional service companies are expecting to have a managed service provider. We find a lot of people in sales these days.

It’s interesting, I’ve been noticing a big change. Up until just a couple years ago, we would often be at times the first managed service provider in the company. They had a break/fix company before of some type or maybe a retainer contract or a block hour contract. We were the first MSP in there.

I’d say more than 50% of my current leads or sales are actually changing from existing MSPs to us, and that’s been a shift I’ve noticed just in the last few years. People are getting so comfortable and confident in the MSP space they’re actively looking for other MSPs if they’re not happy with their current one. So, that’s been a big shift I’ve noticed.

Ryan Goodman:

That’s really interesting. As you spun up the business, we had talked that you were building or working as an entrepreneur prior to 2007. You define 2007 as the official start date. What was it like moving in to that role in that transition period prior to 2007? Were you working full-time somewhere else and doing your practice on the side? At that point of leaving that 9:00 to 5:00 structure and becoming self-employed, what was it like for you taking that step?

Chad Lauterbach:

Yeah. I’ll take a quick step back to high school before I jump into my adult life. I had started two smaller companies when I was in high school. One was a computer building company, like a system builder, which, of course, back then was popular. That was a lot of fun; I learned a lot about the tech and I really enjoyed it at the time.

But the margins were real slim. Even back then you had eMachines and just chic computers on the market. It was hard to make money. It was hard to differentiate yourself, because even when you tried to differentiate yourself on the high end, you still had the players like IBM and Del and Gateway back then out there that were making high-end systems. So, it was tricky to differentiate.

I also created a web design company, but I sucked at design and I wasn’t a very good coder. I didn’t really spend the time to learn code. If I had one big regret when it comes to my time and work in the IT space, it would be I didn’t spend more time learning to program. I learned basic programming concepts and I spent some time doing it, and I can read some code, but I’m by no means a developer, and I wish I would’ve spent more time and energy learning to develop.

But that being said, both of those businesses are long, long, long defunct now. I went and worked for other people for four years only. I worked at a transportation company and a health care company roughly two years each. Again, building those departments from the ground up.

Ryan Goodman:

Sure.

Chad Lauterbach:

I always wanted to get back to working for myself. I really liked that.

Again, I feel so lucky. I feel like I just keep saying “I’m lucky” all the time, but I had great bosses, great mentors, great people that I got to work with. I did not have bad experiences working for other people, but I still had the entrepreneurial bug; I wanted to get back out there and try to do my own thing.

I always was moonlighting, working on clients after hours in the evenings, weekends, et cetera. I already had some clients in my client roster, if you will, so when I decided to make the jump, I went to one lead I had in Los Angeles and I went to my current employer, the health care company, and said, “Hey, will you guys both sign up with me?”

The health care provider said yes, so they became a client instead of hiring me as an employee, and the other company said yes. So, I was able to make the jump and take a very small pay cut when doing it. I was able to architect that in a way that was fairly easy.

I think a lot of people have to do something a little more drastic; I think generally people would have to do something more drastic, and that’s I think still the reasonable choice if you have the skillset and the desire to do it. But I was able to do it without a whole lot of pain.

Ryan Goodman:

Well, that’s a really cool story, and it’s really neat to hear as we interview a broad spectrum of service providers and partners just what brought them to that point, and it’s fun to hear the big differences.

I don’t think there’s a right or wrong way. It’s always interesting to hear how someone ended up exactly where they are. Appreciate the insight and explanation around it as well.

Chad Lauterbach:

Yeah, definitely. Yeah, I’ve always been a bit of that … I loved the movie, Good Will Hunting, and I’ve always been …

In school, I didn’t go to college, and one of the reasons was … One of the funny things I always tell people is I couldn’t fathom paying people to give me work when I could get paid to do work. So, college didn’t make any sense to me.

Likewise, after having worked for people for a few years, I was like, “These people aren’t any more special than me. They’re great people, nothing against my former bosses, but I can do this too. Why would I make money for someone else when I can make money for myself and chart my own destiny rather than be on somebody else’s sailboat?”

I’ve always had that mentality toward life, and a lot of people don’t have that. I know a lot of people that want to show up to a 9:00 to 5:00 and their passions lie elsewhere outside of their work, and their work just enables them to live those passions. That’s awesome.

For me, those have always been tied together. I like being able to chart my own course in business and in life in parallel at the same time.

Ryan Goodman:

Well, it’s the true definition of an entrepreneur. You’re sitting in exactly the seat you were designed for, and I think that’s really clear.

Chad Lauterbach:

Thank you.

Ryan Goodman:

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So, as you made that transition from break/fix and project work as your primary source of revenue and then moved over to the managed services business model, what’s it been like for you? Was it a hard transition, or do you feel like it was a really smooth transition in operation once you’d landed here?

Chad Lauterbach:

It was a very hard transition for me. I’m not a natural salesperson, so that’s one of the weaker areas for me. I’ve learned to be better at it, but I don’t think I’ll ever be a killer sales guy.

I always believe that people can excel the most when they work out their best muscles. Somebody that’s a naturally good basketball player is gonna become an amazing one if they work hard at it. I can become a better salesperson, but because that’s not a natural fit for me, I’m never gonna become a rock star salesperson.

The sales part of it was really challenging for me to figure out the sales pitch and why this is a value. I have a sales pitch now that I think works really well and I think is honest, but that was a hard part for me.

And then besides the sales part, finding the right tools was really a challenge. That might be because we weren’t cutting edge, but we were earlyish to the managed services game. Kaseya was one of the only players in town on the RMM town, and its still a good product; we still use it for some things, but the monitoring component didn’t work that great. The backup component was really bad.

There weren’t a lot of great managed service provider backup solutions at the time. There weren’t a lot of great managed AVIM solutions at the time. There was ConnectWise, which no offense to ConnectWise users, but I didn’t love. There wasn’t really other good options. We chose a product that’s now defunct and we eventually moved to Autotask. But I think we’ve been through four backup solutions, two RMMs, two or three PSAs.

There was a lot of fine tuning on the actual services we wanted to deliver and the way we wanted to deliver them. I feel good about the solution we have now, but it took a lot of time, so I’d say it was more painful than easy.

Ryan Goodman:

Sure.

Chad Lauterbach:

Fortunately.

Ryan Goodman:

And I think as you’re evaluating those tool sets … It looks like you had looked at a lot of things and automation, of course, inside of the model, is critical to the success of the business.

You had also mentioned a little bit earlier that managed services, as a concept, there wasn’t necessarily a definitive point where you said, “Okay, here’s the model. I get it. It was spelled out clear.”

What about the process of realizing that model existed? How did you go about finding the tools to help you automate your business? ‘Cause it sounds like a fluid progression, but I’m guessing there were some different points in time where you had something presented to you or you were at a conference and you saw some of these different PSA tool sets or monitoring tool sets.

What were some of those points inside of the business where you realized that automation and moving to that MSP model was critical to your business success?

Chad Lauterbach:

Yeah, I wish I could speak to when I learned of the model and started to do research on it. I just can’t recall the exact point when that came up.

Ryan Goodman:

Sure.

Chad Lauterbach:

But when I started looking at import tools, the best investment I made was buying Kaseya. There weren’t a lot of tools on the market at the time. I think N-able was out there.

There weren’t that many tools at the time. It’s amazing how many there are now. Now I can go talk to a newbie that wanted to get started in the MSP space and be like, “Okay, here’s the only three PSAs to look at and here’s five great RMMs to look at. Go. They’re all pretty good, so pick the one you like.”

Back then, it just wasn’t quite like that. Like I said, we made some definite mistakes on the ticketing and PSA systems, but I think we got lucky in choosing Kaseya. I think it was … We obviously looked at other products carefully, so it wasn’t a uneducated decision, but choosing Kaseya and moving forward with them was definitely a first really good step.

And it was a scary one because, before I could have any managed services revenue, I had to buy a remote management and monitoring product so I had something to sell. That was a bigger risk for me than starting the company.

Ryan Goodman:

Right?

Chad Lauterbach:

The biggest risk I took back then was … Now you have all these subscription model stuff, so you can go to Autotask and get a whole package, PSA, RMM, everything, for a relatively low monthly fee. If you fail, you just go bankrupt and you say, “Sorry, guys.”

But for me, I already had a business that was established for a few years. I had some revenue and customers, and that was my livelihood at the time. Kaseya was like, “Hey, yeah, for $35,000,” or whatever the number was, “You can buy Kaseya.” I was like, “Oh, man. That’s intense.”

They didn’t have a friendly monthly service offering, so that was a big risk, and it ended up being the right risk. And actually, in some ways, I think it … There’s a small benefit to that that I think is lost in today’s world with everything being subscription service. When you plunk down a big chunk of change, you commit to something. I was really passionately committed to making it work.

I think we do this in our regular lives when we buy a car, or buy a house, or any time we make a big investment. We think about it. Maybe a stock or something. We’re cognizant of that being a big investment, and we’re stuck with it for some period of time whereas, when you sign up for DirectTV, you throw it away tomorrow if the cable company comes up with a better offer. With all these monthly services, you have no commitment to them. You just don’t care. You can sign up for X service for Y dollars per month and cancel the next month.

I think I could’ve gotten squeamish if I had signed up for Kaseya for $500 a month and, four months in, not had a sale. Would’ve been like, “Oh, let’s cancel it.” So, having plunked that change down, I’m like, “I’ve gotta make this work.” I was really committed to it.

Ryan Goodman:

It kept you committed.

Chad Lauterbach:

Yeah.

Ryan Goodman:

So, you talk about taking that risk, and you’re right; people making those decisions today, it’s not such a either game time or go home decision anymore. What as the point where you felt like, “Okay, I see momentum from making this decision,” and …

How did you feel? Was that a huge boost in confidence to continue to step forward and look at other tools at that point?

Chad Lauterbach:

Yeah. It started with … I went to my existing time and materials, a retainer client, and sold them on managed services. Now I’d have to …

I probably have records of it, but I’d have to look and see. I bet more than half, for sure; I bet close to 75% of my clients converted, so that was really exciting. I was like, “Okay, other people agree and see this model as a functional model.” That was really exciting.

And even my clients that were a little bit skeptical of it. They were like, “You know, I’m not totally sure, but I trust you, Chad, and I think you’re gonna make this work.” I was glad I had that much clout with some of my clients that they’re like, “We’ll give it a shot with you and see how it goes.” Some of those clients are still with me to this day, so I think it’s proved that the model can function really well over a long period of time.

But certainly, probably the most exciting thing was those first couple brand-new clients I landed that had never been clients before and signed up for managed services deals. That was really exciting.

I will say, something that I can teach a newer MSP person that I wish I had taught myself, that I’ve only learned, honestly, in the last few years, is I’ve oftentimes short-sold myself. ‘Cause when you’re selling managed services, the sale cycle is long and you do get objections.

It’s not a slam dunk sale. If you go in and they’re like, “Hey, I’m gonna charge you $150 to fix your computer, so call me when you want. Here’s my card,” everybody’s gonna take that. Even if they don’t call you, they’re gonna take your card and be like, “Oh, okay, we’ll keep you in mind. Great, thanks.”

Ryan Goodman:

Right.

Chad Lauterbach:

Or if you did short sell yourself and you’re like, “Yeah, I’ll manage all your IT for $40 a user a month,” and you just lose your shorts on the deal, well, everybody’s gonna take you up on that, too, ’cause you’re selling way under market and you’re losing money.

It was hard for me to force myself to sell at the right price and let deals pass if they weren’t good or not to revert back. For a number of years, I kept reverting back. When a client was like, “Oh, I don’t want managed services,” I’d let them do TNM or I’d let them do a retainer. It took me a long time to just say, “That’s all we do. We don’t do anything but managed services anymore; we won’t sell you anything.”

And I had some really lucrative projects come up. People coming to me and saying, “Hey, I have an $80,000 buildup project.” I’m like, “Man, we can make 30% margin on that or whatever.” I’ve just gotta be like, “You know what? That 24 grand and that in-gross profit is not worth the destruction to my team and distraction from my primary business goal, which is managed services.”

It’s only been the last few years I’ve gotten to that point where I have that level of confidence to say, “No, thank you.”

Ryan Goodman:

That’s a big turning point in a business as an entrepreneur, saying no to money to follow a proven model and continue down that path.

Chad Lauterbach:

Yeah. Yeah, and I’ve seen a couple … The MSP space, one of the things I really like about it is, it’s real friendly. A lot of business spaces are real competitive or cutthroat, but I know a lot of my competitors.

I know a lot of the owners, and one of the guys I’m thinking of right now, I won’t mention his name or his company name, but he’s roughly my age and he’s grown faster than me. I actually attribute his more successful growth almost directly to him saying no to everything that’s not high-margin managed services.

He learned that lesson earlier than me and he was able to grow faster than me, I think, because of his commitment to that. I remember having a conversation with him quite a few years ago about it. He’s like, “I won’t do anything but that.”

Ryan Goodman:

Now, you led me perfectly into my next question, which was, “If you could talk to your younger self after seeing what you’ve accomplished today, what would you say? What wisdom would you impart to your younger self?” I think you talked a lot about that with, you oftentimes sold yourself short early on. Is there anything else that you would tell your younger self?

Chad Lauterbach:

If I was telling my much younger self, being really honest, I’d probably say, “Learn to be an expert coder.” I think I had it in me. I think I still have it in me if I ever had the time, although it’s harder to teach older dogs new tricks.

The nice thing about managed services is it scales. That’s the problem with TNM work is, it’s very, very hard to scale. It’s not impossible. Of course there’s TNM shops that have scaled, but very tricky. But nothing scales better than software or digital assets.

So, if I could’ve created a tool for the managed services space … I already knew IT and computer systems. If I could’ve created a tool for IT people, that would’ve been a totally different way to scale my knowledge and create a business. But I know that’s not specifically what you’re asking.

If I was to talk to my younger self that was already committed to IT service and managed services, or the person I guess committed to IT services but not sure about managed services, I would say, “Figure out a way to get more confident faster.” I think that’s one of the things that …

Maybe this is unique to me ’cause I started so young. It’s hard for me, at 24 years old, to walk in a room of older men and women that are on the executive team of some company and tell them how amazing my company’s IT services are. I felt [inaudible 00:34:24]. I felt that weight of these experienced people and me being less experienced. I lacked the confidence it took a while to build.

I think now I know there’s way to build that. I could’ve joined the Chamber of Commerce, I could’ve taken public speaking classes, I could’ve taken debate classes. I could’ve done things to gain confidence that don’t require getting the experience in board rooms.

Looking back, that would’ve been a critical skill I would’ve learned ’cause that’s a soft skill. I think the other skill that I would’ve learned would’ve been committing to making money.

‘Cause I tend to be a generous guy. I like to give to nonprofit organizations I like, both my time and money. I like to be generous with my employees. I like giving gifts to people, friends and family. That’s great, but later in life I realized what allows me to be generous is by doing good business and making money.

It’s not bad to make money. I know that might sound silly, but I gave too much away in short selling myself. Again, this goes back to the earlier conversation. I just gave too much away. I sold too cheap. I didn’t stick to my guns, I didn’t sell the high-margin managed services I needed to sell.

What I realize now, too, it wasn’t only me doing a disservice to myself, I did a disservice to our customers and our employees. Which sounds strange, because you’d be like, “Well, your customers got a better deal because they paid less.”

That’s not actually true, and this is part of why I’ve been able to gain confidence in selling higher-margin managed services. When you sell lower-margin services, you stress your team more, you stretch them thinner, you stretch your systems thinner, and you don’t provide the same outcomes and the same quality those people are expecting for the price.

You’re selling that level of managed services, whatever that level is for you, no matter what you’re charging. The key is charging enough to deliver it. With managed services, you can’t provide great service to your customers or treat your employees well so that they provide great service to your customers if everybody’s stressed and running around like chickens with their heads cut off all the time.

You have to have space to do managed services, which means you have to be charging enough to have people in their seats, thinking and doing things proactively. So, yeah, you can’t run on the edge; you can’t run on razors and margins if you wanna provide great, quality services. You’ve gotta make money. You’ve gotta charge enough to have margins and you’ve gotta make money.

Ryan Goodman:

I think that’s great advice, and you’re right; there’s not gonna be a phone number or an e-mail active to contact if money’s not being made inside of the business. I think wise business owners understand that, but it doesn’t mean you don’t still have to sell through that in a competitive market.

Chad Lauterbach:

Yeah. Yeah, definitely.

Ryan Goodman:

And you really nailed, again, on the last question I have as we wrap up here. I feel like you gave a great point. I’ll let you answer this one, but, what’s the number one point or message that you would drive home to any of your peers listening to this podcast?

I think it’s gonna be tough because I think you hit some really … several just key issues and very key business points inside of the conversation. But I’ll leave you with that What’s the number one point or message that you would drive home to any of your peers?

Chad Lauterbach:

I would actually give a peer of mine two tips, especially somebody younger in the business, or getting started in the business, or interested in getting started in the business. These could probably be applied to multiple industries, ’cause they are high level, but I think they especially apply to ours.

The first one is a strategic one, and it’s a big-picture one, but you need to be able to do it to run any business. That is, know your strengths and don’t just rest on them, but develop them, and know your weakness, and don’t try to push through them; hire amazing people to do those things for you and do them well.

That would be my biggest big-picture thing for any entrepreneur in any industry, really, but especially in ours. If you’re a great salesperson, for example, go sell managed services. Get your sales pitch together and go ring up a zillion dollars of business, but you will have tons of mad customers and tons of terrible reviews online if you don’t deliver the services.

If you aren’t an amazing service delivery person, you need to hire an amazing CPO. And don’t skimp on their salary. Figure out a way to make it work from the beginning. Hire the right person to start and build on them. If you need to give ’em equity, if that’s your thing, give ’em equity. If you need to build some long-term vesting schedule or whatever …

Do what you have to do to get the people underneath you committed to helping you build the company, and just find those really, really good people that wanna partner with you to do that with your weaknesses.

And then develop your strengths. Don’t just say, “I’m a great sales guy. I can ring up as much business as I want.” Actively work to develop that stuff. Read sales books, figure out how you’re gonna develop your website, and your SEO, and your SEM, and your marketing, and all that stuff. You have to work at your strengths to be good.

I’m a runner, for example, and one of the most amazing things that I’ve experienced in running was hiring a coach. It’s not that expensive, actually, if you do it online, so I have an online coach. Not a coach that meets up with me every day or every week or whatever, but somebody that’s helping me building my schedule and I can talk to.

I was amazed, ’cause I worked really hard in my 20s. I ran some marathons, ran some half marathons, and I ran track and cross country in high school. I thought, “Oh, this is so cool. I’m doing well.” But I was frustrated because I wasn’t improving, so I went to run the Chicago Marathon and I trained so hard and I barely ran faster than I ran in LA and I was really frustrated.

Got a coach, and that coach took something that was already a strength for me … I’m a naturally somewhat good runner; I’m not Olympic level or whatever, but I’m decent at it. That coach took me from being slightly above average to a Boston qualifier and running a sub-three-hour marathon in three years running less than I did training by myself for Chicago.

That’s amazing. That just goes to show that, if you develop your strengths and don’t just rest on your own laurels but work on them with somebody that can help you do it, you can knock it out of the park without even more effort. It’s pretty amazing what you can do with honing your strengths and skills in the right way.

That would be my big strategic pitch, and then on the tactical side … And this would be more related to IT services specifically. The number one thing I would tell people is, “Overbuild your systems.”

From the beginning, or as early as you possibly can, it is very hard, and I know this from experience, to turn the ship. Not impossible, but … I mentioned earlier [inaudible 00:41:52], we’ve changed multiple times. It is so painful and very expensive to shift, and you’re not gonna pick every single thing perfectly.

But pay really close attention when you’re choosing your vendor-partnership relationships and when you’re building your systems and developing your systems. Build them to be bigger than you think you need them to be for your current state.

I failed to do this. I chose poor backup solutions, I chose poor PSA solutions, and we suffered because of that. We have great solutions now, but it was way more painful to build them later than to have started to build and develop them earlier. So, as early as you can, start to flesh out those systems and overbuild them for your size so you can scale into them.

Ryan Goodman:

That’s awesome advice, and especially backed up with all of those examples.

To wrap up, where can people connect with you? Where can they find you online?

Chad Lauterbach:

Sure, yeah. You can find me, personally, on Twitter, @chadl2. C-H-A-D-L-2. I also have that Instagram handle, although I don’t use it very often. You can find Be Structured @bestructured. That’s the Twitter handle, or bestructured.com. That’s B-E-S-T-R-U-C-T-U-R-E-D.com. So, it’s not just the B, it’s B-E structured.com. Or you can google Be Structured Technology Group and we come up.

Ryan Goodman:

Before we end today’s episode, we’d like to thank our sponsors, 5 Step Marketing and BVoIP. Don’t forget to take advantage of your free one-hour marketing strategy session with Josh and his team. That link, again, is 5stepmarketing.com/audit. That’s the number 5. 5stepmarketing.com/audit.

And check out BVoIP if you’re looking to improve your telecom strategy. You can find BVoIP online at BVOIP.com.

Chad, it was a pleasure. I wanna thank you for joining us, and spending the time with us today, and sharing your wisdom with us not only how you started, but how you’ve become successful and sharing some of those struggles and successes with us and that advice.

Chad Lauterbach:

Yeah, that was great. Have a good one.

Ryan Goodman:

Thanks again for joining us today on the Confessions of an IT Business Owner podcast, where we believe that healthy cashflow is critical for your IT business, automation is paramount, and building trust with your clients by looking professional will help you grow your business.

A special thanks, again, to Chad Lauterbach from Be Structured Technology Group. Be Structured Technology Group can be found online at B-E structured.com.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Peter Kardel, CEO of Clever Ducks.

Welcome to the Confessions of an IT Business Owner podcast, where we believe that healthy cash flow is critical for your IT business. Automation is paramount, and building trust with your clients by looking professional will help grow your business. I’m your host Ryan Goodman, and today you’ll learn about some profound struggles related to owning and growing an IT business and how Peter Kardel from Clever Ducks overcame them.

Peter Kardel:

The only way that you’re going to be able to grow your business is if you are able to develop a management leadership team that can take over more and more important parts of the business.

Ryan Goodman:

Here’s the podcast with Peter.

Peter thanks for joining us today. Why don’t we kick off by you giving us your company name and tell us where you’re located.

Peter Kardel:

Well, thank you. It’s a pleasure for me to be joining you this morning. I’m Peter Kardel, CEO of Clever Ducks. We are located in San Louise Modesto, California.

That’s halfway between San Francisco and LA, right on the coast.

Ryan Goodman:

Well, that sounds beautiful. At this point, I’m not even going to tell you where I live because there’s just no comparison.

Peter Kardel:

Well, we do have to contend with earth quakes, fires and mudslides. So, if that makes you feel any better, it’s not all perfect here.

Ryan Goodman:

Fair enough. I stand corrected. There is a meme that I see floating around on

Facebook in the winter. Again, we’re based in Fargo North Dakota where it says,

“The air hurts my face. Why do I live in a place where the air hurts my face?”

Peter Kardel:

Well, you know, I don’t believe that there is bad weather. There’s only bad equipment.

Ryan Goodman:

Ah, very true. So, why don’t you tell us a little bit about your business model, as well as really the passion behind starting it.

Peter Kardel:

Well, really how I got started was really something that veered me away from my dream. I wanted to be an attorney like my father, and practice environmental but, along the way I became totally infatuated with technology and automation, and how it could act as a lever, enabling a small town attorney to compete with the big law firms in the [inaudible 00:02:32] and in LA. That was my father. He used technology to go up against the Goliath in the industry. I was just fascinated by that leverage that you get from it.

So, I started helping him with technology in his law practice. Pretty soon, other attorneys in his office building asked me to help them. It just all was history after that. I was referred into firms all over the town. Pretty soon, I was thinking, “Man, I want to get serious about this. I want to study technology and figure out how I can bring this leverage to folks in other industries.”

Ryan Goodman:

Oh, that’s awesome. That’s a really cool why, and the catalyst to be a business. So, prior to being in business were you working for your dad full time, or did you have another nine to five? Were you in law school at that point?

Peter Kardel:

No. I was in high school at the time. So, I did work in construction because I love working with my hands and building things. I still do. Maybe that’s because that’s why I was interested in engineering and environmental law. But, it didn’t become a full time job really ever. I was always either having other work or I was in school full time, and using my IT consulting as a way to put myself through school.

So, I came out of school with very little student debt, which is great.

Ryan Goodman:

That’s awesome. I think there’s a lot to be learned through this for today’s youth.

Peter Kardel:

It’s true. It also gave me contacts. So, while I’m studying, it gave me fuel really. I want to be better at what I’m doing, and be able to add more and more value. So, it made the study really a lot more appropriate. It wasn’t abstract at all.

Ryan Goodman:

So, as a young entrepreneur, your dad was of course an entrepreneur as well, and influence in your life.

Peter Kardel:

Oh yeah.

Ryan Goodman:

The move towards technology from legal, how was that perceived by your family and by your dad?

Peter Kardel:

Well, I think there was two things I did to disappoint my father. One was I decided not to go into law. I say that tongue in cheek because he was thrilled because he loved technology. I think that was almost his first love. Then, renaming the company from Kardel Computer services to ultimately, Clever Ducks. I mean, just like wow, you gave up the name. You’re not out there front man with the name.

You changed it to something that wasn’t the family name.

Ryan Goodman:

Sure.

Peter Kardel:

And we did that because I didn’t want … you know, when we did that I was very conscious. I wanted to grow an organization. Wanted to grow a team, and it wasn’t about me. I realized that my success was really going to be measured by the work that my team did. That’s why we did that renaming.

So, fun fact though, though I didn’t go to law school, and he said every business person, every entrepreneur should take the first year of law school because that’s when you learn all the really important rules of business. That’s true. But, I’ll say that you can also marry somebody who becomes a lawyer. My wife is being sworn in to the California Bar today.

Ryan Goodman:

Well congratulations for her.

Peter Kardel:

Really excited about that. So, I think I’ve out done you dad because I didn’t have to go through all the effort of law school. I now have my life partner, has all the skills so she can help me in the business.

Ryan Goodman:

That’s awesome. I bet your masters service agreement is going to be bullet proof here short enough.

Peter Kardel:

Yeah. A really good agreement is one where everything is just spelled out in plain English. Our service agreement is two pages long, and it’s incredibly transparent.

Ryan Goodman:

That’s great.

Peter Kardel:

I had a … There’s a pretty large, I think the largest law firm in the area, the senior partner looked at it, read it over, and he said, “You know what? Let’s do business.

You’re incredibly transparent and we can trust you.”

Ryan Goodman:

So, the kiss model is truly working for you when it comes to legal ease.

Peter Kardel:

I hope so.

Ryan Goodman:

Yeah.

Peter Kardel:

I mean, if you take good care of people, and you treat them the way you want to be treated, and you treat them with empathy, and you’re fighting for their business’s highest and best good, it’s unlikely that you’re going to get into a place where there’s real conflict.

Ryan Goodman:

Right.

Peter Kardel:

It’s just important to make micro adjustments along the way. So, when you start to have issues that come up in personal relationships, maybe a difference between expectations and actual performance with a direct report or employee, or something is just not sitting right with a client relationship, it’s really important to

have those conversations early and often so you can make minor course corrections before things become more and more emotionally charged.

Ryan Goodman:

That’s great advice. So, shifting gears a little bit here. Why don’t you tell me about some of the wins that you’ve celebrated in being the owner of a technology business?

Peter Kardel:

Something my father said, because he was a business and tax attorney, was that for most small businesses that only value at retirement that they will have at the end of their career will be their building that they do business in. So, he just encouraged

his clients to buy the building, the place where you do your business out of because, that’s a way of storing up value that will be good for your financial future and retirement.

So, we listened to my father and we bought this building in 2012, down town San Louise Modesto. Big enough to rent out nearly half of it to some commercial tenants. That’s great, it’s a place to expand into some day. That was an amazing experience. Amy managed the whole construction process and the design, and the moving and everything. I focused on running the business. I mean the quarter that we moved to the new building, we have our highest quarter ever.

Ryan Goodman:

Wow, no stress.

Peter Kardel:

[inaudible 00:09:05] you know. And make the move happen. The great thing about it is we had a space that was customized for us. We learned a lot from the previous couple of spaces that we’ve been in. We were able to build a lot of things that we wished we had had. It really increased our efficiency, on a great, great deal. So, having space that’s yours is incredibly valuable.

I think all the biggest wins really have to do … I’ve looked at the grand scheme of things as the owner of the company. I’m putting my shareholder hat on right now, not as the tech who started the company, who’s passionate about technology. But, I’m now wearing the hat as the shareholder who owns the business and, sees the values of business growing. I think all the biggest wins were cases where I’ve been able to, with the help of others like HTG and other peers in the industry, is to develop leaders in my company to take over roles that I had. So that things are happening. They’re doing better work in those roles than I ever did.

That’s just incredibly rewarding when you hear feedback from a client that, “Oh, you know what? You guys did great. This issues came up and you were able to work it out with the vendor.” I mean, you exceeded their expectations and I’m not even aware of all of the steps that had been taken. I just know that my team took care of it. That’s just incredibly rewarding because it’s not about me. It’s about the company that I’ve helped develop that has enduring value that could continue to deliver value when I’m on vacation, if some day I transition out of the company. It just continues to create value. I just love the thought of that.

Ryan Goodman:

I love the focus. Again, it ties back to something that you talked about earlier, leverage through automation. You know, you’re really also speaking to leverage through staff and empowering other people. I think a lot of small business owners really struggle with that. Right? Because especially if they’re the owner founder, getting passed being in control of everything and empowering your staff to rise, and take control.

Peter Kardel:

Sure, I mean, it’s very challenging to give up those roles for key reasons. I’m a very intuitive person. So, a lot of the things I do I do intuitively. The challenge for me is to sort of reverse engineer what I’m thinking and how I … what my process is, in a

way that I can teach others and systemize it so that it can be replicated through the organization. So, people with my personality, that’s the challenge to us, is to put it down on paper and document it, and train others. Do it in a way that’s super simple, so it’s easy to cross train those processes because then, I can focus on other things. I can invent other new ways to deliver value for our customers.

Ryan Goodman:

I know we’re really talking in a theme here, and again, you mentioned this earlier, automation through technology. We’re talking through staff and leverage through staff, empowering staff, and documentation. So, I know we’re both on the same page. I mean, automation is critical to the success of a business. You saw this and learned it early on. What was the point inside of your IT business where the light bulb really went on off on the different parts of the business you could automate? What are some of the things that you do automate in your business today that would have eliminated maybe some of the struggles that you had in the past? That was a big question, sorry.

Peter Kardel:

I think that … Yeah, that’s a big question. When you’re starting to delegate processes that you’ve been doing and you realize that you’re starting to write down the steps that are taken and articulate all the exceptions that can occur, well it’s this way unless this happens. Then, you got to do this. The documentation can get really, really long and the process of training somebody can become more and more onerous. What you’ll find is that if you take the time to look at how technology can address this work flow, and what you’re trying accomplish, it has a potential of really simplifying and streamlining lots of processes. It makes the task of delegating and cross training, these important processes in your business, a lot easier.

There’s a concept called non value add. Looking at things you do in your business that add value and things that don’t add value. This is sort of advanced common sense but, anything that doesn’t add value, you want to stop doing or, reduce as much as you can, or automate as much as you can so you can spend most of your time and energy doing things that add value.

Ryan Goodman:

Right.

Peter Kardel:

When I say add value, I mean add value to your customer because that’s what you’re getting paid for. Your gross margin is directly proportional to the amount of value that you can add to your customers, right? So, an example of a non value added process in your business is billing. You know, billing your customer doesn’t add any value to your customer. They could care less really if you bill them or not. Maybe they would prefer if you didn’t but, it doesn’t add any value to them. It’s incredibly important to you. You need to do it in order to get paid, and pay your people, and continue to grow and innovate. But, it’s a process that you want to streamline as much as possible so that you can bill the customer efficiently. There’s zero defects really in the billing process because anytime money is changing issues, it’s kind of a sensitive issue.

Ryan Goodman:

Absolutely.

Peter Kardel:

So, eliminate defects. Totally reduce the amount of time and energy that it takes and just streamline it as much as possible. If we can get it as close to zero as possible, that’s huge. That’s something that we’ve done, and there’s a lot of parts to that. One of them is just how you structure your business relationship with your customer. If you can simplify it as much as possible and not have all these different ways of calculating how you’re going to bill them, but really realize, you know what? 99% of the time these very simple rules will govern and the 1%, don’t even worry about it so you can make the billing arrangement super simple. We fix feed everything. Almost never will we do a project and charge them time and materials.

We like the fix costs and customers like it too. So, they’re never surprised. They get a bill from us. They know what it’s going to be for the monthly service. We include everything in that monthly service that they need to run their business. Then, anything that’s a project, that we’re adding something that’s new or, we’re upgrading something or replacing something. Then, it’s a project and they get a fixed fee bid essentially for that, and we do it for that fixed amount. That eliminates just a lot of headaches from a billing standpoint.

Ryan Goodman:

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Now, back to the show.

It sounds like you guys have really refined, not only in billing but throughout your business in multiple areas, the make it easy to do business with you.

Peter Kardel:

Yeah.

Ryan Goodman:

I mean, that theme. Make it easy to do business. Let’s not complicate. Let’s not over complicate. Let’s take it down to its lowest common denominator and just make it very simple.

Peter Kardel:

Yeah. I mean, you’re eliminating a barrier to entry.

Ryan Goodman:

Exactly.

Peter Kardel:

To do business with you and continue to do business, and continue to do business. I mean, you know those vendors that it’s just a hassle, the way their bills come in and the way you pay them. They make changes and, and it’s really obtuse, they get things wrong. It’s so irritating and so, we’ve really strived to eliminate any way that it’s a hassle to work with us.

Then, another factor on the billing side is, well we had this experience that was just … I wouldn’t say life threatening but, it was pretty dramatic, where suddenly our accounts receivable started to just climb. Really quickly, and clients were not paying us on time, clients that paid really consistently were falling behind. It was very alarming. It just happened over the period of three months or so. And, what had happened was, we just weren’t getting the mail. We had a number of mail carries that had change. Yeah, and I don’t want to throw the US Postal service under the bus, especially since our current mail carrier is awesome.

Ryan Goodman:

Sure.

Peter Kardel:

I just want to say that right now.

Ryan Goodman:

Shout out!

Peter Kardel:

Shout out! But, yeah, I mean the checks just never showed up. They weren’t being stolen. The mail just wasn’t being delivered. That included bills too, accounts payable. So, we realized that this is a risk to our business, that we’re depending on this service. They’re talking about eliminating Saturday delivery. We need to figure out a way to dematerialize the cashflow into our business.

Then, another factor is, the check comes in, a staff person has to open the mail, take the check, apply it to the correct invoice, relieve the accounts receivable balance. Then, go prepare a deposit. Take the money to the bank or scan it and put it in the bank. There’s all these steps, right?

Ryan Goodman:

Yep.

Peter Kardel:

What if we were able to just eliminate all those steps, and by the way we’re eliminating a whole bunch of steps on the customer’s side of handling the accounts, their accounts payable, if we were to dematerialize that, and handle it all electronically through ACH. So, that’s something we did about a year and a half ago, using Connect Booster. We had heard about them, and I noticed the ATG started billing us through Connect Booster and, I had a very satisfying experience as a customer with that process. So, we implemented that, and it’s been fabulous to just send out the agreement bills and then, couple days later, all the cash is just in your bank. It’s just amazing. Like printing money.

Ryan Goodman:

That’s great. Hey, and I mean, automation in cash often times is the thing that will feed the ability to focus on automation in other areas of your business, right? You kind of choke yourself out on a lot of other initiatives if cash flow is not attended to first. I get it. I get it. Been there, and done that too.

Peter Kardel:

Yeah. You know, I just wanted to add, the challenge that all of us small business owners have is that our customers are all being sort of programed to expect service like Amazon. If you think about the customer experience with Amazon, it doesn’t matter what time of day or night, or on a holiday or what, if you want to order something, find something, look at a past order, look at an invoice, transact business with them. It’s very, very easy to do.

So, that’s kind of the standard that we’ve set for ourself. Like, Hey, how can we make this more like put the information at the customer’s fingertips so they can log in, and they can see, and get the information without having to call us. We want to make their experience with us more like the e-commerce side of the Amazon.

Along with of course that very personal high touch relationship that we have.

Ryan Goodman:

I have lots of conversations with lots of business owners, you know, being in the payment space. And, not only IT service providers but, about any business type you could imagine. A lot of the things that I’ll chuckle at is making it often times hard for customers to pay you but then, I’ll ask, “How do you pay your babysitter when they come?” A lot of times it’s a VENMO or AZEL. It’s some simple way that they’re not even giving cash to the babysitter anymore but, they’re a technology company not using technology to make it easy for their clients to do business with them. A little ironic. But, you know, to each their own.

Peter Kardel:

I love that. A great example of how the consumer space, in this little shadow IT, is happening there with paying your own babysitter. That’s great.

Ryan Goodman:

Why don’t you talk to me a little bit about some of the struggles that you’ve gone through, and how you’ve overcome them in owning your manage service business.

Peter Kardel:

Do we have to talk about struggles?

Ryan Goodman:

Well, I’ll leave it up to you.

Peter Kardel:

I think the biggest struggle is really developing managers and leaders. The only way that you’re going to be able to grow your business if you are able to develop a management and leadership team that can take over more and more important parts of the business. I wasn’t taught that in school. It’s not something that attorneys learn. Doctors aren’t taught it. We’re taught our craft, but all the squishy human, soft skill development stuff, how to organize your business from a leadership standpoint. Many of us didn’t have any formal training in there. It’s very difficult.

You can’t be efficient with people and relationships. There’s a lot of skill involved.

That’s, I would say that’s been the biggest challenge.

Ryan Goodman:

So, I think we’ve determined that first year of legal school and, psychology are two solid precursors if you want to be an entrepreneur.

Peter Kardel:

I think so. There’s some really strong leadership development programs out there. We stumbled on this program called Giant Worldwide. One of my peers had gone through this program, Matt [Highit 00:25:27], he’s got an MSP that’s just growing like gang busters in Atlanta, Georgia. I watched his leadership and his communication style of his leadership, he just transformed over the year that he was in the program. Then, I heard it through interactions with his leadership team, just permeate in his company, which is very unusual. A lot of times the leadership team will go to some kind of leadership training and get some valuable training and insight, and maybe some skills, but it isn’t easily just summing it down to a company. What you really want is a common language and a set of skills and tools that can be taught and just, have a self sustaining way of permeating throughout the entire company.

That’s what Giant Worldwide has been able to do. They’re serious, or their criteria is that the tools that we’re bringing to you need to be something that you can easily teach a 13 year old who can then go and teach her friends in 10 minutes.

Ryan Goodman:

That is cool.

Peter Kardel:

It’s really, really … It’s not that it’s very simple, or not sophisticated but, it’s the great elegance and the tools you’re putting away that make holding powerful conversations with the people you work with, and clients, and family members and kids and spouses, very, very easy.

Ryan Goodman:

Well, that was a really cool bit of information. Appreciate you sharing. I’m over here taking notes just burning up my pad and pen here. That’s incredible. Cool, thank you for that. Shifting gears a little bit, if you could talk to your younger self after seeing what you’ve accomplished today, what would you say and, what wisdom would you try to impart on your younger self?

Peter Kardel:

Oh my gosh. Well, I would tell my younger self that contained in your personality are the seeds of success but also self sabotage. Now, let me explain that a little bit.

If you look at my Meyers Brigs on INTT. So, I am very intuitive and I think in very big picture things. I like to art tech the future. I’m always thinking about the future and how things could be better, and how we could cheat. You know, not just make incremental changes but make some kind of curve jump. I love that kind of thinking.

But also, in my wiring is to be very detail oriented. It’s a little unusual. So, I often sabotage myself by diving deeply against the details and staying in the weeds for way too long because you know what, it’s safe to be in the weeds. You know, you can see the progress. You can check boxes, and I think that’s a lure that a lot of technical people have when it comes to reading and growing their business is that the safety, and what they’re familiar with and their technical skills can be something that derails them from doing the hard work of delegating more and focusing on the stuff where they can have the biggest impact on the business, which really you should be the CEO, the leader of your company, you should be thinking about how are you going to grow this company? How am I going to grow my team so that they can do their very best work? You know, what’s holding back my management team from their greatest influence?

The time you’re spending doing that is huge outside the return on fussing with little details in the business or working in the business doing direct, like delivery of service versus working on the business. And, thinking about how can our work be better? I find myself continually drawn in that direction because I love those details but, I think that sooner you can get out of working in the business and work on it, the better.

Ryan Goodman:

Agreed. Boy, we’ve had quite the interview. I mean, chalked full of just awesome information. I have one more question for you, and it is along the thread of the last question. So, what would be the number one point or message that you would drive home to any of your peers as they’re listening to this podcast today?

Peter Kardel:

I mean, I think the number one thing is it’s not about you. You just can not do it on your own. You want to surround yourself with great people, and invest in them so that your work, or the value of your efforts will be measured through their work. Also, surround yourself with peers. Join the peer group. Reach out to other business owners and leaders that are struggling with many of the same things you are. Get help from them. Get insight from them.

Ryan Goodman:

Absolutely.

Peter Kardel:

You can’t do it yourself, and why would you want to? It’s very rewarding to work with, to get and to give, in these peer relationships are just incredibly rewarding and it just will really accelerate your business. You can skip a lot of problems, you know? The best problem is the problem that you can skip.

Ryan Goodman:

Absolutely. Amen. Well, Peter, I want to thank you for your time today. Before we jump off the call, where can people find you online? What’s your website? Can they

find you on Facebook? Twitter or, any other social media platforms?

Peter Kardel:

Yeah. So, our website is www.cleverducks.com. If you were to look at our website, you would see that there’s really two audiences that we’re trying to reach on our website and in Facebook. That is potential or future employees, as well as new customers. So, our online presence really, I would say, it’s more biased towards finding future clever ducks.

Ryan Goodman:

Sure.

Peter Kardel:

Yeah. So, that’s incredibly important. That’s like the fuel for growing our business is the people that we can attract and retain. I can be reached by email peter.kardel … that’s K-A-R-D-E-L at cleverducks.com. Facebook.com/cleverducks.

Ryan Goodman:

Before we end today’s episode, we’d like to thank our sponsors. Five step marketing and BVOIP. Don’t forget to take advantage of your free one hour marketing strategy session with Josh and his team. That link again is fivestepmarketing.com/audit. That’s the number five, fivestepmarketing.com/audit.

Check out BVOIP if you’re looking to improve your telecom strategy. You can find BVOIP online at BVOIP.com.

Well, thanks again for joining us. It was a pleasure talking to you. We really appreciate your time Peter.

Peter Kardel:

Oh, I really enjoyed it. Thanks so much for inviting me to spend this time with you.

Ryan Goodman:

You bet. Thanks again for joining us today on The Confessions of an IT Business Owner podcast, where we believe healthy cash flow is critical for your IT business, automation is paramount, and building trust with your clients by looking professional will help grow your business. A special thanks again to Peter Kardel from Clever Ducks.

Clever Ducks can be found online at cleverducks.com. To download the full podcast or listen to some of our previous episodes online, check us out at connectbooster.com/podcast. Thanks for joining us today on The Confessions of an IT Business Owner podcast. We’ll talk to you soon.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Tim Conkle, CEO of Roland Technology Group & The20.

Welcome to The Confessions of an IT Business Owner Podcast, where we believe that healthy cash flow is critical for your IT business, automation is paramount in building trust with your clients by looking professional will help grow your business. I’m your host Ran Goodman and today you’ll learn about some profound struggles related to owning and growing an IT business and how Tim Conkle from Roland Technology Group and The 20, overcame them.

Tim Conkle:

Vision without execution is a dream. You can dream big. You can have a vision of what you want to be, and the problem is, is a small, small company execution is a nightmare.

Ryan Goodman:

Here’s the podcast with Tim. Well Tim, thanks for joining us on the call today, appreciate you spending a little bit of time with us here at Connect Booster and Confessions of an IT Business Owner.

Tim Conkle:

Uh-oh.

Ryan Goodman:

You didn’t know it was going to be this deep, did you?

Tim Conkle:

I didn’t, but this’ll be more like therapy.

Ryan Goodman:

We’ll probably both do each other some good, how about that?

Tim Conkle:

Absolutely.

Ryan Goodman:

Beautiful. Well why don’t we get a couple of the basics out of the way? Tell us your business names, because you are an entrepreneur’s entrepreneur and own multiple businesses, and also where people can find you online.

Tim Conkle:

Start at the beginning, Roland Technology Group was my natural MSP based in Dallas. Then from there, we built out a, just from pure need, a VoIP company, and that VoIP company is Cytracom and you can find it at cytracom.com. And then from there, the next iteration with us was obviously The20, you can find it at the20.com. That is a aggregation of lots of MSPs moving in the same direction, ultimately if you look at it that way.

Ryan Goodman:

Sure. So talk to us a little bit about how you got started in technology and that started with Roland Technology Group, is that correct?

Tim Conkle:

It did, it did. In fact, me being in technology probably was the least likely thing to happen in life for me. Because when I was in high school you had a pager, never touched a computer, went in the military and by some osmosis of being in the infantry, I get stacked into a room where I’m working on a computer. I literally fell in love with computers in the military.

From there got out, obviously went to college for the programming side and got a bachelor’s degree in that and then thought that I would write code forever. In actuality, I never wrote any code whatsoever, outside of college I never wrote a single line. I went down the route of infrastructure, worked for a company called EDS. Most people will know that because Ross Pero owned it and ended up selling that company to General Motors for 3 billion bucks. So I worked there but I had the technology bug, so in 1992 I literally bought a company that was founded in 1986, which was an IT company.

Back then everybody built white boxes and had a storefront and all the other things that went with it. But I was much more business-minded just from my background. So I took that IT company, which was really a residential IT company, fixing computers for every day people. I took it completely towards the B2B space and eventually completely out of the residential, or anything that would even have an [inaudible 00:03:54] component to it, if you want to know the honest truth.

Ryan Goodman:

So the exposure to computers and technology was in the military. What about the passion behind becoming an entrepreneur and starting the business and deciding that I’m going to buy this business in 1992. What was the drive behind that? What was the reason behind that?

Tim Conkle:

So if you look at my family itself, all of my uncles own their own business. My dad owned his own business. All of my brothers own their own businesses. It’s literally in our blood. My dad, my mother has 11 brothers and sisters, eight of them which are boys, all but one literally have a business that my dad started and gave to them. So my dad was notorious for teaching us how to fish, in other words, creating entrepreneurs.

Ryan Goodman:

Right.

Tim Conkle:

So it’s literally in our blood, I think.

Ryan Goodman:

That’s incredible. What an environment to grow up in. This is a side question, but what were some of the dinners conversations that you guys had? One of the fears in my life is, how do I teach my kids to have a great work ethic while growing up in an entrepreneurial household and having more than I had. What were some of the things that your dad did to make sure you guys knew how to work your rear ends off?

Tim Conkle:

It’s kind of crazy, I boil everything down, that I am, how I think, how I do business to three real stories with my dad. One is, every morning at breakfast we would all, we all ate breakfast together, all my brothers and sisters, which I had seven brothers and sisters. Every morning, my dad went through a ritual of talking about, “We’re Conkles. We can do anything we want. You’re the smartest kids in the world and the only thing that will ever keep you from being everything that you ever imagined in your mind to be is not executing on your dream.” This was a story that got told almost every single morning.

The other thing he did was he taught us to dream with our eyes open every morning. Typically when we ate, he would tell stories, grandiose stories of things that were much bigger than we were. But he always told us these things when we were awake, alive and well, which meant he taught us to dream with our eyes open. He’d always say, “Dreaming at night when you’re asleep is okay, but it really never brings anything to reality. Learn to dream with your eyes open. Dream bigger than you are and you’ll always be more than you ever thought you could be.” So that was the second thing. There’s long stories to go with that.

The third was, a story about a motorcycle which I tell all the time at different conferences and things. That story is the foundation principle for every successful thing I’ve ever done in anything I’ve ever done. If it’s followed, all 20 members that come in, hear that story. It’s the first story they hear from me when they come visit my office in Dallas, because it guarantees anyone that applies three basic principles, it guarantees them success. You cannot fail. I don’t care what you’re doing. I don’t care if you apply it to marriage. I don’t care if you apply it to your kids. I don’t care if you apply it to your business, it doesn’t matter.

In life, and if you look at my life in all the things I’ve done, I can attribute it back to the basic fundamental I learned in that story. Or that, it’s a story I tell, but it’s a real-life event that happened with my father. I always thought, and still to this day think my father is probably the smartest guy I have ever met in my life and he is truly, truly, truly a guy that thinks outside the box. He has no boundary. His mind has no boundary as to what he can be and what he can do and all the other things to go with it. Incredible, incredible childhood.

Ryan Goodman:

So the motorcycle story, you have me on the edge of my seat, my friend. Is this proprietary? Or can I get a confession out of you?

Tim Conkle:

You know what, it’s not proprietary, but it really takes on real meat when it’s white boarded out. It takes about 45 minutes to tell the story. So I would love to tell that today. I don’t think we have time for me to tell that story.

But the reality is, is everybody, even look at The20, the people live by the principle and it just works. So no, at some point I would love to share that story with you. I just think we’d run out of time today if I went down that road.

Ryan Goodman:

That makes sense. And I think all of you out there in podcast land that are listening to this, I’m taking notes. Please don’t be taking notes while you’re driving. I’d say the call to action here is seek out Tim and seek out the events that he’s speaking at, because I know I’m going to be going to The20 to make sure I’m hearing the motorcycle story, or at least maybe I can get a private session.

Thanks for that, and thanks for the advice and sharing really what help drove the success and also obviously worked very well in your family to foster the entrepreneur mindset at the beginning of every day and really at the beginning of life, for you guys as a family. Incredible.

Tim Conkle:

Oh yeah. Yeah.

Ryan Goodman:

So, shifting gears a little bit. What are some of the things that you’ve learned in growing your business that most people wouldn’t know, even today, about managed IT?

Tim Conkle:

My personal opinion is that managed IT or an MSP is swiftly getting overtaken by other things. If you call yourself an MSP five years from now, it’ll be kind of like calling yourself break/fix right now. Nobody wants to be break/fix, right?

I think that stretching the boundaries of what a company is and all the other things. Think about this for a minute as a simple thought. If we think about an MSP, and I tell this at conferences all the time, I would say 99% of MSPs from a client’s perspective is a bad business decision but a necessarily evil. Now that’s a big statement to make.

I tell people that if I educated them that they wouldn’t sign their own paper. And then they wonder why they have such a conflict getting a client to sign it. It’s because they really don’t like doing business with us. They love what we provide. We provide a working environment and everything. But the actual business itself, I don’t know of any other business on the face of the earth where there is absolutely zero goal alignment. Think about that for a minute, right?

In IT, for a long time, the goal of the client and the goal of the IT company are two separate things. They’re diabolically opposed to each other because one cannot grow their business and do the right thing for the client under how things are done now. So, I think there has to be a shift in this industry towards more of a business mindset instead of, just this thought process of, “”Okay, I’m going to go in and I’m going to sell this guy IT.” Because it’s such a bigger conversation now. They’re not looking for IT. They’re really looking for more. And then they’re looking for goal alignment.

I tell this story a lot of times, and it’s simply this. If you were to want a car today, let’s say you had in your mind a red Volkswagen Beetle. It was a beautiful car. It’s what you wanted. It’s got the tulip holder on the dash. Although you’re probably going to put a cigar instead of the tulip in there. So you go and you find a street somewhere in somewhere USA. There’s three dealerships right next to each other and it happens to be all Volkswagen. You don’t understand why, but it’s there.

So you walk in the first one, you want to drive the red car that’s up on the stands. You drive it. It’s beautiful. It’s wonderful. It’s great. It’s incredible. So you take it down the road. You love it. You come back. You sit down in the office and what is the dying question? What is the dying question that every person has in that room? Or the person that’s buying it, what do they have? And it’s simply this, “What does it cost?”

Ryan Goodman:

Exactly.

Tim Conkle:

The guy tells you it’s $1,000 bucks. Next dealership, you’re a smart guy, you’re like, “Man, there’s two more right next to each other. This is easy, I just walk right next door.” So you walk next door and you walk into that dealership and you talk about the red car and the guy tells you this story, he says, “You know why there’s three dealerships right next to each other? It’s because we’re three brothers and we argued with my dad as to who was going to run the business when he retired. So what he did was he created three offices in this one dealership and said, ‘Hey, may the best man win. But you’re going to scale and share everything together. You’re going to provide everything exactly the same way. Same cars, same service department, same everything.'” So now, the dying question is, when he tells you, “You can buy that same red car from me.” The dying question becomes this, “How much is it?” And the guy says, “It’s $2,000.” And you’re like, “Wow. I think I’ll go to the third one.”

You go to the third one and he starts to tell you the story, you say, “Hey man, I don’t care. I don’t want to hear it. I know you can sell me the red car that was on the stands. I’ve already driven it. I’ve already done it. Your brother next door already told me why you three exist. I just want one answer and that is, how much is it?” He says, “It’s $3,000.” Which car do you buy?

Ryan Goodman:

You go to the first.

Tim Conkle:

Of course, because you just made a business decision. It’s the same decision that every business makes inside of a room when they have three IT companies in and when the IT company leaves, seven, eight days later they call back and they say, “Hey, I noticed that you hadn’t called us back. I really thought that this was going to be a great fit.” And all the other things. You finally get them to answer you back. They basically say, “We bought on price.”

Ryan Goodman:

Right.

Tim Conkle:

Our industry has long sold on price because there’s no real differentiator. So now they buy on price, but now the frustration that comes in. Let’s say there’s a fourth dealership. This is typically how we sell to our clients. You walk in the dealership, you know the car that you want and that’s that fourth brother that they shoved him way in the back, but you found him and the dying question is, how much is it? And he looks at you an winks at you a little bit and says, “Man, I’m on your side.” He said, “Don’t worry about how much it is. Just take the car. I’ll send you a bill.” How many people buy from that guy? None.

But it’s the same with the IT. We walk into a room and the guy says, “How much is it going to be?” And we really can’t quantify it. I don’t know what it’s going to be. It depends on what happens. So if our industry doesn’t shift, other companies are going to take our business away from them. Companies like The20, that now have shifted, instead of an IT sale, or even a delivery system, we’ve shifted to a business sale. We have aligned the goals of ourselves and the business owner as one.

Example, if you took a break/fix company, think about this, sitting at a table and you look across the table and say, “Hey, I’m only going to charge you when it breaks.” And then you ask the goal of the business owner. “Hey, what is your goal?” “Well our goal is for it to never break.” How does the break/fix guy make more money and hit the goal of the guy that’s across the table? It’s an impossibility.

It’s like telling your kid, “Hey, if you don’t have a dirty room every morning, I’ll give you $100 bucks.” What’s it going to be every morning? Your goal is for it to be clean. It’s going to be dirty every freaking morning, why? Because that is how the reward are enumerated. So IT companies that are enumerated by things broken our out of scope or things like that are always going to major in the ways of making more money.

Ryan Goodman:

We’d like to take a quick break to highlight our sponsors and some of the things they’d like to offer our listeners.

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Tim Conkle:

So I think our industry, and that was a real long way of answering your question. But I think there’s three basic fundamentals that every IT company, I don’t care how big you want to get, you have got to master three fundamentals, lead gen, you’ve got to make your phone work. You’ve gotta make a potential problem or a company with a problem. You have to make a way for them to call you or find you. Lead gen, you have to do marketing.

Next is sales. I just talked through sales and how sales are all the same and no uniqueness. The20 brings about a very, very unique way of doing business. I have never had a member not change and shift to this model. Nobody has ever even balked at it.

The third is you gotta be able to scale. You’ve got to be able to compete with your mind shifts, your all covereds. You’ve got to be able to compete with multi-location companies. If I walk into a company in Dallas and they tell me they have a Boston location and they say, “Hey we want an IT company that has a Boston office.” I’ve got to be able to compete at that level. If I can’t, in time it’s going to hurt all of us.

Ryan Goodman:

So we’ve talked a lot about some of the struggles that the industry as a whole is facing. Things you’re going to need to address. Certainly you have answers to a lot of those struggles and problems and the methodology that you’re working through with your group of MSPs and IT service providers inside of The20.

How about some of the personal struggles? Some of the, have you had a brick wall moment as Tim Conkle? If you can identify one, and what have you done personally? Because as we’re talking, to entrepreneurs here, not only are we talking industry-wide, but there’s also the mental game of being an entrepreneur and sometimes you’re your own worst enemy. Any examples of that throughout your business tenure?

Tim Conkle:

I think you can look at the first 18 years of trying to build an IT company. My goal was to hit a million dollars in revenue. If you look, 96% of MSPs never hit a million dollars. So when I hit a million dollars I could have said, “Hey man, I’m a 4%er.” And stopped right there.

Ryan Goodman:

Right.

Tim Conkle:

But the real problem was the 18 years. Entrepreneurs and people that are in business have one basic fundamental flaw, they are adverse to change. Even though they know that they have to. It took me 18 years to figure it out. The reality is, I don’t care how many conferences you go to. I don’t care how many tools you buy. I don’t care how many books you buy, how many mentors, how many anything that you do. If you are not willing to change, and for 18 years, I thought I had the tiger by the tail. “Hey, I know how to grow.” But the reality is, the brick wall was literally adversity to change.

Thinking that … And you can boil that down to living on an island. Every IT guy that’s living out there that’s living on an island, one, never has the catalyst to change. But if you think, it’s ironic, because people go to conferences over and over and over and over. I was at a conference and asked this simple question, “How many people have been here five times?” Had a bunch of hands fly up in the air. And then I said, “How many companies, out of those, have grown five times more than you were when you first came?” And I might have got two hands.

Why do we do the same things over and over and over and over and over and over and over and over and over and over, when we know damn well they don’t work and then we gripe about not growing? You literally have to change. And that was the hardest thing for me to do. You can’t micromanage. You can’t control everything. In order to grow, you have to change and you have become very open-minded and you have to try stuff. Basically you have to spend money sometimes. And that’s a hard thing for MSPs to get around.

Ryan Goodman:

That’s great advice.

Tim Conkle:

They’re like, “Oh wow. Well if I spend $1,500 bucks for lead gen and I don’t get anything back, man.” Well if you didn’t spend the 15, you’ll never know. I mean. So no, I think the biggest wall was just being able to change. Because when I changed, it was exponential. The growth was exponential. It’s no longer, can I hit a million or two million or three million or four million or five million or six million? The money is a by-product of doing things right. Money follows a successfully run business, period.

Ryan Goodman:

So the advice, if you could talk to your younger self in addition to saying, “Remove the adversity to change.” What would you tell your younger self, now after seeing what you’ve accomplished today?

Tim Conkle:

Knowing what I know, this is pure honesty, I would have started The20 a whole lot sooner. Here’s why, our problem is, as small IT companies. And let’s just talk about sub one million, for a minute, because that makes up 96% of the marketplace. The problem is, trying to do everything yourself and being paralyzed.

I say this all the time, vision without execution is a dream. You can dream big. You can have a vision of what you want to be, but if execution doesn’t exist … And the problem is a small, small company, execution is a nightmare. Why? Not enough time, not enough people, not enough money. So the only way around that … If you think about The20, just a basic fundamental, let me take just marketing is a basic fundamental. If you took 10 small companies, their thought process would be, “Hey let’s hire 10 marketing people and we’re going to market.” That’s their execution plan.

Well they don’t have content, they don’t have anything. But that’s their plan. So let’s say they paid each one of them $40 grand, just as an example. That’s $400,000 a year. Wouldn’t it be a novel idea if 10 IT companies were sitting around a table and the 10 said, “Hey, we really need to market. But let’s do it together instead. So instead of marketing one at a time, 10 different times, 10 different ways, managing 10 different people, all of that stuff. Why don’t we do this one time? We’ll market one way, one time, we’ll hire two people to do it and we’ll all get the upside of scale.” Ultimately, that’s what The20 did. In just that example right there, I found $320,000 that is already being spent that has absolutely no return without adding something to it.

Ryan Goodman:

It’s a beautiful concept. And not only beautiful in concept, it’s beautiful in execution as you guys are doing it right now.

Tim Conkle:

Oh, it’s beautiful, yeah.

Ryan Goodman:

I know we have a number of mutual partners coming to see you guys here at the conference here for The20.

Tim Conkle:

Yep.

Ryan Goodman:

Which I would highly recommend individuals to reach out to Tim, his team. He talked a little bit about the ways to contact him and his team at the beginning of the podcast. We’ve really gone through some excellent information here, Tim.

I almost feel like I’m doing injustice asking this last question, because we’ve really boiled down a number of points. But in closing, if we were to drive home a single point to peers listening to this podcast, and specifically, maybe individuals that don’t know about The20, or don’t know about your story, what do we want to leave them with?

Tim Conkle:

I think simply this, if you look at the next five years in the IT space, what you see is a consolidation happening. Which means there’s going to be lots of big companies to compete with. So as small guys, if we’re going to exist, we have to do something different.

If you look at the idea of the marketing thing for The20, take that out to all the pieces of an IT company. Your ticketing system, why would 10 companies do it 10 times, 10 different ways? Upgrade it 10 times, maintain it 10 times, pay setup fees 10 times, pay professional services 10 times. At some point, you have to step back and say, “You know what? I don’t have to control every single thing. Let me look at” … And I would challenge everyone, if you truly want to grow and be in a competitive environment, I would challenge you to look at The20.

And the reason being is, is we deal with the most important numbers on a profit and loss sheet. So if you’re the owner of a company and you own it, question is asked all the time, which number is most important? I always hear the bottom number. I would argue that. I think the most important numbers are the ones in the middle. When we individually, as IT guys, have to pay over and over and over and over and over and over and over, for vendors, minimums and all the other things that go with it, we throw so much money out of the door that’s in the middle, labor, all of that.

What if we could scale, and that’s what The20 really is, it is a scale organization. How to take a two, three, four, five million shop and make them a 60 million shop overnight. One, giving them a competitive edge and all the other things that go with it. But the reality is, it’s about making the bottom number the best it could be.

It reminds me of a story with Marcus Lemonis, who does the profit, the TV show The Profit. In this story he’s buying a 50 million dollar company, he’s buying 51% of it. That means that Marcus Lemonis, if he makes this sale, he can walk out in the world and tell everybody that, “Hey, I’m a majority owner of a 50 million dollar company.” So if what you want to do is to be able to tell people, “I have tons of employees and I do this, and I got a million dollars in revenue.” If that’s the horn you want to blow, it’s fine. But it’s kind of like this story. Marcus Lemonis buys 51% of this thing and he buys it for $750,000. 50 million dollar company, think about that for a minute.

Now, I told lots of people and lots of people said, “Well at least it’s worth one times revenue. 25 million, blah, blah, blah, blah.” No, the problem was all the numbers in the middle was bleeding out. Every bit of profit, so there was no profit at the bottom. So for everybody listening, the thing I’ll leave you with is, every guy starts a business to build wealth, personal wealth for himself and his family. Remember this, it’s all about squeezing the middle to make the bottom really, really plump. I think that’s the best advice I can give people today.

Ryan Goodman:

That’s great advice.

Tim Conkle:

And I’ll say this as my last statement.

Ryan Goodman:

Sure.

Tim Conkle:

And that is, I’m open to anybody, if you’re stuck out there and you’re trying to figure something out and all those things, I’m a very open, easy to reach guy. Reach out to me. I really want people to be successful, period. Whether they’re part of The20 or not.

Ryan Goodman:

Before we end today’s episode we’d like to thank our sponsors, 5Step Marketing and BVoIP. Don’t forget to take advantage of your free one hour marketing strategy session with Josh and his team. That link again, is 5stepmarketing.com/audit, that’s the number 5stepmarketing.com.audit. And check out BVoIP if you’re looking to improve your telecom strategy. You can find BVoIP online at bvoip.com

Tim, you’re a busy man and I gotta tell you I really appreciate you spending the time with us today to really talk to all of us out in the community. And again, guys, if you’re driving, pull over to take your notes, listen to it again. Tim, it was a pleasure talking to you. And I’m looking forward to seeking you out, ’cause I need to hear this motorcycle story, brother.

Tim Conkle:

Cool stuff man. Hey, I appreciate you guys having me today. And most people will find this pretty crazy but I don’t think I cussed through this thing and typically I do. I mean this was clean, man. People will be like, “Man, that’s a different Tim Conkle you had.”

Ryan Goodman:

You’re a class act man. Hey, do you need to throw something out there?

Tim Conkle:

No, no.

Ryan Goodman:

I don’t want to throw off your game buddy.

Tim Conkle:

No, no. No, no. I’m good. Again, I appreciate you guys having me and I will talk to you guys later.

Ryan Goodman:

Thanks again for joining us today on The Confessions of an IT Business Owner Podcast, where we believe that healthy cash flow is critical for your IT business, automation is paramount and building trust with your clients by looking professional will help you grow your business.

Welcome to the Confessions of an IT Business Owner podcast. In this episode, you’ll learn about some profound struggles related to owning and growing an IT business from the perspective of Scott Wittstock, CEO of Fidelis Inc.

Welcome to The Confessions of an IT Business Owner Podcast, where we believe that healthy cash flow is critical for your IT business, automation is paramount, and building trust with your clients by looking professional will help grow your business. I’m your host, Ryan Goodman, and today you’ll learn about some profound struggles related to owning and growing an IT business, and how Scott Wittstock, from Fidelis Inc., overcame them.

Scott Wittstock:

Remember, your service is worth something. Don’t undervalue yourself by giving away free or gimmicky things. The free network assessment seems like a good idea, but is it really? That’s a lot of work.

Ryan Goodman:

Here’s the podcast with Scott.

Ryan Goodman:

Well, Scott, welcome to the call. Thanks for joining us on our podcast here today. I have a whole list of questions for you, so I hope you’re ready for the interrogation. Again, thanks for joining us. To get the basics out of the way, why don’t you give us your business name, and where people can find the business, and you, online.

Scott Wittstock:

Thanks for having me. The business is Fidelis, Inc., and that comes from Semper Fidelis, from my Marine Corps roots. You can find us on fidelisnw.com.

Ryan Goodman:

Awesome. Now, as I did … I did a little bit of research on your company, as I always do before I jump into these interviews, and you have a whole bunch of interesting things that I found about your business. I always have this stack of questions that I use to uncover and learn things about the individuals that I’m talking to, but just in your intro, you made a reference as a Marine, and your business name tying back to your military service. I’d love, first of all, to thank you for your service to all of us, and all of us listening, but also that’s obviously had an impact on your business, and I’d love to learn how the military service … Did it get you started in technology or is there a tie-in there, or did you trip upon this business by accident?

Scott Wittstock:

It did not get me started. It started in high school. I worked for a neighbor’s company, started out in the warehouse of a telecom company. That was starting around 15. I’ve always been a serial entrepreneurial person. I’m always tracking money, trying to figure out how to make more. I think it’s always been the chase that’s been exciting. I went through the steps of understanding what they were doing. It was really interesting. The next year, next summer, I worked for them again, starting pulling cable.

Scott Wittstock:

Shortly after that, I realized I didn’t want to go straight to a college. The plan was always to go to college after serving the country. I wanted to be really challenged, come from some deep sports wrestling roots, and things like that. I really loved the physical aspect of what the Marine Corps was going to bring to the table. I then added in, I wanted to do some level of communications. As a young punk, I didn’t really know what that meant, when signing up for the Marine Corps. That could be the guy that yells and screams at others. That could be the guy that communicates, “Your order’s up.” It’s a very general term.

Scott Wittstock:

Through a series of events and trainings and other opportunities, I ended up in, started off, as a field radio operator. I finished top of my class, and they had a couple slots for the next level, so then I went to a multichannel equipment radio operator, dealt with microwave signals and basically early days of military PRIs. We were sending data across these [pipes, inaudible 00:04:14]. I did my four years of that and got out, got a job immediately back in the industry in the telecom side, and then it went from there.

Ryan Goodman:

At what point did you start your business?

Scott Wittstock:

I started my business officially in 2008.

Ryan Goodman:

Was that a prompt from dissatisfaction with an existing job, or is that just the natural progression of your serial entrepreneur nature?

Scott Wittstock:

When I got out of the Marine Corps in the late ’90s, I joined one company that then again became another company, then again got assumed by another company.

Ryan Goodman:

Right.

Scott Wittstock:

My position and my job didn’t change, but my business card kept changing. It was right around the last acquisition. We got taken over this time by a bigger, well not bigger, but hostile … It was hostile.

Ryan Goodman:

Sure.

Scott Wittstock:

I lasted for about six months before I made up my mind that I’m going to go do something different. I had no idea what that meant at the time. I had contract opportunities left and right, so that’s what I thought I was going to do. Then, somewhere along the line, I became an MSP.

Ryan Goodman:

Sure, and I think that evolution will resonate with a lot of individuals’ dissatisfaction maybe with their current state. They’re good at what they do. Lots of opportunity thrown at them, and the next thing you know, you have a business on your hands, and now what, right?

Scott Wittstock:

Yeah, and I’ve had businesses before, always side things. I’ve done everything from flipping homes to, even when I had that other job, I started working on personal computing side of business, home residential stuff, little flyers, things like that, just to make a little extra money, but I don’t know if it was ever really about the money. I think it just fed this constant challenge, and I really enjoyed that. That’s how I got my start.

Scott Wittstock:

Even though I was telecom, I did large PBX. I didn’t get out of bed for anything that didn’t have a thousand phones. I had unified messaging. I went all the way back to Windows NT, XP. I’ve been through all those evolutions, as we were doing early days of unified messaging. We were doing early days of data backup, tapes, things like that. There was a lot of things just put on us, as telecom professionals. I did more colleges, airlines, hospitals. Those are the customers that came over with my new company. That’s what happened.

Ryan Goodman:

As those customers rolled into the newly found managed service business, what were some of the surprises that you encountered? Were you taking on more work now for those individual clients, and was some of it unexpected, or was it pretty much the status quo of what you had handled for them previously?

Scott Wittstock:

I believe most of it was unexpected.

Ryan Goodman:

Right.

Scott Wittstock:

One of the surprises I had into the more information technology, the IT side of the world is how I felt it was very undisciplined. A lot of people have a different idea of how to do it versus what I came from, definitely my Marine Corps roots, or definitely how I came from the telecom roots. Telecom’s been around a long time. There’s color codes. The standards are a lot more tight, right? This industry, I saw that one person had an idea, and generally they were a technician. They’d never really ran a sizable project, where they had to do these large deployments and large communications, constant … I’ve always said, and probably back to my Marine Corps roots, “In the fog of war, those that communicate win.”

Scott Wittstock:

I just went that approach, and one thing led to another, that someday an airline called me and said, “Hey, can you take on this Windows 7 upgrade and run the whole project for us. It started more on a PMing side, I think, as a project management side, and then, before I know it, they have full-time Fidelis employees out on their sites. It just … We have a dedicated service group. It’s something that we offer with our MSP plans. We can have dedicated there 40 hours a week. We have some plans that that’s one day a week, half days, just a pattern.

Scott Wittstock:

I really like standards, because it really makes it easier. That’s what I think I brought to the table for some of these organizations. You hear, a lot of times, the virtual CIO. I really think we are playing that, but we’re not virtual. We’re actually being contracted to be the CIOs and technicians. There’s different levels. I think it’s become a little cliché or unfair to call everyone a virtual CIO, because what experience does a technician have? It’s really the technology. Does that make them good at writing HR policies and those type of things? I think it’s an unfair term these days that people are using.

Ryan Goodman:

I hear you, and I think the model is really interesting, how it evolved, and the way that those employees and those resources literally do become even an onsite extension, like you had mentioned, of that business, pushing your clients initiatives forward.

Scott Wittstock:

Yep.

Ryan Goodman:

That sounds like a huge win. When you had mentioned that the airline had called up, it started this project management and then evolved into more, I’d really like to build on that. What are some of the other wins that you’ve celebrated inside of the business?

Scott Wittstock:

You know how everyone says, “What’s your vertical?”

Ryan Goodman:

Right.

Scott Wittstock:

Mine is like, “Do you have a project?” Some of my wins have been hospitals. We’ve done everything from large scale cable projects to DAS deployments, distributed antenna system deployments. Sometimes we’re the provider of the equipment and the installer, or sometimes we’re just the project management team. We’ve gotten that.

Scott Wittstock:

One that we just completed up is the Seattle Monorail. This is a pretty big Seattle icon. It’s one of the only functioning monorails in the country. They weren’t able to take credit cards on either end. They came to us and said, “What’s your solution? Do you have any?”

Scott Wittstock:

We ended up taking our team and running fiber down the line, an end-to-end solution to help them build it all out, address security, those type of concerns we had. We just wrapped that one up. We have a couple school districts that we help service around the area. It’s just a really interesting mix.

Scott Wittstock:

Some of our customers are IT customers. Some of them are just a local digital cabling group. Some just are our voice. We do our business telephone systems. Then, our favorite customers are the ones that it’s all three. It really helps us. We’re not all the same technicians, the same planners, the same project managers. It’s really ran as three different entities inside Fidelis.

Ryan Goodman:

Sure, that makes sense. We’re set up very similar in our structure in our organization, too, so I definitely understand that. Now, how are you acquiring your customers? A couple questions around that: Are you doing anything specific for marketing, because you said you’re not really focused in a vertical? Do you feel like it’s your marketing, or is it a byproduct of the standardization and the model that you’ve created that’s helping attract people to you? Is that word of mouth, or is it being very intentional through outward marketing of your process that’s bringing these deals in for you?

Scott Wittstock:

Number one, excellent question. I ask myself this very question. It’s like, “How do we keep doing it?” Marketing is … I’ve tried. I’m not great at it. It’s not what I do. What we do is I think we approach it as treat the customer as a human being. The technology is just a tool that they use. You don’t-

Ryan Goodman:

You’re right.

Scott Wittstock:

I think it’s just really, honestly, a word of mouth. We do a lot of functions. We’re plugged into the area. We support local fundraising, nonprofits. We attend their events, and always, if they’re a customer, we always try to give back, and those things are helpful to us, but it’s just something we do. I don’t think … It’s not with a motive, and I think that just resonates with all of our clients.

Scott Wittstock:

I built my entire organization around caring for each other, and I think it just trickles out. I would love to learn how to get my message out there more, but then there’s the reality of, if we get too many clients, can we actually service our excellent clients we already have. If we still have to grow … I want growth. Don’t get me wrong, but I want intelligent growth. I don’t want to have to just throw a bunch of bodies at it, and then not deliver a quality product. I think those are just things … In a nutshell, it’s been word of mouth over the years. It started with one phone call, one connection, one person that knew I could do it or knew one of my team members could do it, and it just keeps on … It’s one giant Fidelis snowball around Seattle right now.

Ryan Goodman:

That’s awesome, man. Well, keep it rocking. It’s a great answer, and I think everybody’s going to appreciate that insight. I think there’s a lot of ways to skin the cat, so to speak. Ew, that sounded kind of rough, but-

Scott Wittstock:

I get it, though. No, it’s true. It’s just like any … In this industry, there’s just so many different ways to approach it. It’s fine and not … Most of them are correct. Some of them are just, it’s just an idea. It’s okay to have the ideas, but I think one of the best ways to approach some of these things is just simply know what you don’t know and to go, “I need to hire professionals to be” … I understand how plumbing works. It does not mean I know how to plumb. I get what a roof does, but I’m not going to be up on my roof, roofing it.

Scott Wittstock:

It’s just like how we use partners like ConnectBooster. I mean, I realize that I’m not good at that. I don’t know how to process a credit card. I don’t know how to process this stuff. I’m not trying to be my [knock, inaudible 00:15:43]. I’m going to contract those services out. It’s just something that started to make sense and, over time, these are things that I started to implement as like, if you can hire it, it’s probably a better deal.

Ryan Goodman:

Right, and I think what you’ve just described is the difference between a self-employed person and a business entrepreneur that’s working to build systems, right? There can be a big difference between that, and a lot of times people need to cross that threshold if they want, and if that’s inside of what they’re trying to accomplish inside of their building. Being self-employed is a lot different than being a business systems owner and building out the systems as an entrepreneur, and you need to leverage yourself. Obviously, it’s worked well for you guys, that model.

Scott Wittstock:

Yeah, I definitely feel like it has worked really well. I honestly could step away from my business right now, and my business would run. I’ve been building that since day one. I’m in it because I enjoy it. It’s still really fun. I love the … It’s so great to be in this type of industry that just keeps on changing and growing, changing and growing. It’s fun to be a part of that. I like that. I feed off of that.

Ryan Goodman:

We’d like to take a quick break to highlight our sponsors and some of the things they’d like to offer our listeners.

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Ryan Goodman:

Now, back to the show.

Ryan Goodman:

We have alluded a little bit to business growth. One of the things I noticed, as I was doing a little research, was you’ve made some acquisitions, and M&A is happening like mad in our space right now. Internally, we encounter it all the time, when we have two different partners that use ConnectBooster that are merging up into one, or one gets sold. I’d love to learn just a little bit more about how you’d come across these deals. What was awesome? Also, what was a struggle, and what have you learned through each one of these?

Scott Wittstock:

We’ve done it three times, officially. There’s been a couple others, just by hiring someone that you kind of acquired their business. What I’ve seen on these is generally it’s when someone wants to step back and just go back to their own roots of, “Hey, I really like the technical end of this,” or, “I really like being the sales guy,” or whatever role, where they realize that, “Hey, I can’t get past this next step. I’ve plateaued.” It’s hard to get past it. You can’t be the only guy that answers the phone. You can’t be the only guy that can do it.

Scott Wittstock:

Some people struggle getting past that point, so what I’ve realized is they’re out there. When there’s the smaller shops that want health benefits, that want 401(k)s, want company vehicles … Frankly, one of the hardest parts of our industry is all that back office work, the HR components, the billing, the payroll. That’s hard. That’s hard for us. That was what … When you go, “Hey, I’m going to go start a business in IT, because I know it’s a well” … What we all forget is all businesses have that stuff. That is where my learning curves were, and I got past that.

Scott Wittstock:

I think I find those people that are just … They’ve already partnered with us on other deals, and then they realize, “Hey, this isn’t so bad over here, to join this team and just to go back to my basics of, hey, I get a paycheck, but I have great benefits, and now I get to take some time off. I actually get to build a retirement,” because the problem is, as these business owners go through, they’re going to hit … A lot of these guys, I think, are going to hit 60 and go, “Oh, my gosh, my business really isn’t worth what I thought it was.”

Scott Wittstock:

That’s what I think they all run into, or could, that it’s just … The value is not what you made on the top line. It’s honestly what’s going to come in the next five years from your … Your bottom line in the next five years is what’s interesting to these acquisitions. I’m getting pinged left and right on it, too. People are trying to acquire us. My response to them is, “Nope, I’m in the buying business, not in the selling business, at this point,” because I’m not done. What am I going to do? I’m 41 years old. I have a lot of time. I don’t know what I would do. I would just start another business, so I’m good.

Ryan Goodman:

Right.

Scott Wittstock:

Challenges, number one, I would say, culture is probably your biggest … People being able to let go of being in charge is hard.

Ryan Goodman:

Sure.

Scott Wittstock:

I used to be able to just show up and do what I did, charge my credit card how I want, all those things. Those are always the hard parts for the former owners, because they got to do that before. Negotiating the deal is also very challenging, because you have to be the guy to break it to that potential business owner their business isn’t worth as much as they think. That’s hard. That’s a hard conversation to have with someone. I stopped having it, truthfully, and I told them to … I recommend three or four M&A companies and say, “Go get a real estate agent that’s for a bigger business. Get a partner that this is what they do.” It’s like, “Don’t make me decide what your company’s worth. I don’t know. Let me know when you have a price tag on that.”

Scott Wittstock:

I do shake a lot of them that are interested in doing this, at that point, because there’s a lot of legwork to that, and they realize that it’s generally, “Well, I made $600,000 this year, top line,” but what did you make bottom line, and how much of it is recurring revenue. I mean, if you quit tomorrow, would you still have a business, or were you the business? What am I acquiring here? I’m not buying people. Those are always things that are interesting conversations to have around people.

Scott Wittstock:

We like to structure our deals around the actual profit a client brings in, because sometimes on paper things look great. That does not mean that company is not going to fold or get purchased themselves. I can tell you that, unfortunately, that clients are lost just simply because some new player got hired, and they have their own idea. I can’t guarantee those prices. That’s how we do it. We structure it based of, “Hey, we’re going to give you a job, and then we’re also going to pay you for everything your recognized organization is going to bring in, and we’re going to bring over your best employees, as well, and anyone you want us to bring on,” because that’s the other thing. I cared so deeply about my employees. If I was going to be acquired, I was going to make sure that I was going to protect them, because I would be nowhere without these people. Does that help?

Ryan Goodman:

That’s really good insight, not only from a process, but also for people to understand. As they’re building their business, they need to be thinking about exit, and they need to be thinking about what are my sources of revenue? What does my leverage look like? Because without leverage, and without that recurring revenue element, you’re right. There’s not a lot there. If you’re exiting the business, and there’s not an employment opportunity, they’re not buying you, right? I mean, they can’t buy potential future revenue. We’re hoping to have locked in, contract, recurring revenue.

Scott Wittstock:

Yeah, yeah, and I started working myself … My entire mission has been to work myself out of my own job each level. Right now, I do a lot of the work with our blog and website. I can’t wait to hand those things off, you know? I don’t know what I would do next, but I’ll just move onto the next mission. Throughout the years, I love jumping back in on project management. That’s one I always like getting back to, because it’s just fun. It can really prove your value, and I just will pick the larger projects.

Scott Wittstock:

I love doing training now. That’s one of my favorite components of what I do, is going and sitting down with … I normally hold … For executives or senior management only, I will hold training for cybersecurity, best practices on things like Outlook and things like that, but I really reserve it to the senior management and decision makers. For me, that’s a practice I like. I’m not saying I’m above any user, but I need to really talk to them about what these things actually look like and, by not putting BitLocker on a computer that, when their car gets stolen … It’s really important for executives to hear their exposure, because what ends up happening is executives in these organizations, yes, with their big fat salaries also comes the responsibility, when that goes south, that you’re the one that’s fired.

Scott Wittstock:

You can only plead so much ignorance on these type of things. I love getting in front of them and talking in a more business sense, less about the technology and more about the HR policy, the handbook policy, those things. I really like that. I really do. That’s been really fun for me. We try to hold those in our local community events in our city. We try to just stay focused, as close as we can, to the business, just for … It’s better for everyone. We’re right down the road.

Scott Wittstock:

We hold those, and we try to get people to attend those. The best part I like about it is I’m never really selling them. I’m just really telling them what I believe in. Sometimes it feels maybe sales-y, but it’s not. It’s really like … I’ll talk about password security. “I love LastPass.” I have nothing to do with LastPass, other than I’m a user. It’s just I like those type of things. They’re really exciting, and I’ve always liked that.

Scott Wittstock:

I’ve always been a coach. I’ve been coaching, for 20 years, a wrestling team. I love coaching. I love building up the wrestlers over the years. I’ve done that in the Marine Corps, too. I just love building not only an organization. I really like building people. I really like elevating people.

Ryan Goodman:

Well, I think, at least for me, you’ve really helped unlock the key to your success in your business and in life by the way that you’re approaching these things and investing the time into people and process. I think that’s really valuable information here that you’re sharing with all of us. I appreciate that.

Ryan Goodman:

I am going to shift gears a little bit. If you could talk to your younger self, after seeing what you’ve accomplished, all the successes, struggles, that you’ve been through, what type of wisdom would you try to impart onto your younger self?

Scott Wittstock:

Not all customers are good customers. You can’t be all things to all people. I really would go back, and I think in a couple scenarios I really should’ve went with my gut. My gut was not wrong, but I didn’t want to let others down, and so eventually I got to the point where I had to make that hiring or firing decision, either a customer or employee, business partner, whatever it was, where my gut, in the early phases of that, was right, and I let it go, go, go, because I thought I could make it work, or in the end I just didn’t want to hurt someone.

Scott Wittstock:

What I ended up doing instead is hurting everyone else that worked really hard, or us, unfortunately, my wife that has to hear all of my monologues that I go on. Those type of things, the stresses. Really, in the end, we get to the same place anyway. I really wish the whole adage of hire slowly, fire quickly … I wish I would go back and, on a couple of those cases, I probably would not have as much gray hair.

Ryan Goodman:

Right, easy in theory, tough to practice.

Scott Wittstock:

Oh, yeah. I’ve done better at it, but then it’s a fine balance, though, too. It’s like you don’t want to become a cold person either.

Ryan Goodman:

Right.

Scott Wittstock:

That was definitely some things. Oh, that, and I wish I would’ve started it 10 years earlier.

Ryan Goodman:

Right.

Scott Wittstock:

I had the tools and the abilities. I’m sure it happened for a reason. Also, 2008 was an interesting year to choose to start a business.

Ryan Goodman:

Start up, yeah.

Scott Wittstock:

I can tell you, we’re really frugal because of it, though.

Ryan Goodman:

I bet.

Scott Wittstock:

We’re really careful with money, and I think it’s that you got scared. At least I didn’t have to … Other businesses had to lay off people and deal with things there. I was starting to build a business in that, and if I earned a customer, I tried to keep them, because I didn’t know where our next paycheck was going to come from. That was scary times. We got through it pretty quickly. In 2010, things started really shifting around.

Ryan Goodman:

That’s awesome. From what I remember right, that also marked the year of one of your first acquisitions. Is that correct?

Scott Wittstock:

It is, yeah. I would’ve done that one a little differently. That was my first one. That was one that I was already partners with them. I was prepared to just go in there and go, “I’m done. I can’t handle you guys.”

Scott Wittstock:

I was polite, and they said, “Hey, we want to speak first.”

Scott Wittstock:

I’m like, “Oh, okay, go for it. What do you need?”

Scott Wittstock:

“Well, we want you to take us over.”

Scott Wittstock:

“What?” I was dumbfounded, and that’s what ended up happening. One or two of their employees are still with me to this day and most of their customers. The end result was great. How I handled it … I needed it to learn, though. I would not discredit that.

Ryan Goodman:

Unfortunately, growth does not come without pain, right?

Scott Wittstock:

No. Now you see people that win the lottery are broke, right? Something that’s just handed to you … If you do not go through the disciplines of the bumps and bruises, I don’t know if you can really … I don’t know if humans work like that. We can’t just be simply handed … We desire achievement, but I think it’s better to have a pat on the back for the hard work than it is just handed to us. That’s at least what I believe now.

Ryan Goodman:

Agreed. It’s empty without paying the price. I think that’s encouragement to everybody that’s an entrepreneur listening to this, that maybe isn’t to the point where Scott is at yet. Keep working. Don’t give up.

Scott Wittstock:

Yeah, definitely. We joke. It’s just, “Open that door. Hard work inside.” I mean, that’s what it does take. We all see those success stories, companies that just grew overnight. In the service industry, can you really do that? I don’t think we can, unless we’re creating a product that just catches on, that’s a viral product or a solution, an inventive side of things that creates something.

Scott Wittstock:

In the service industry, it’s disciplined. It’s earned. It takes longer to build some traction. Stick to it, anyone that’s doing it. If you like it, there’s plenty of business in all of these regions. Frankly, more people need to be out there helping us. We are going to be overwhelmed with security needs here in the future.

Ryan Goodman:

Agreed. That trend is blowing up.

Scott Wittstock:

It’s a trend forced on us. We’re not choosing to be these targets, but it’s there. From small to big, it’s going to need experts to help fix it when it happens and help prevent it. I think it’s more of a team effort here. That’s where this … There’s a level for all of us, and I think everyone should search for their vertical, their niche. Just try to find it. Don’t … If you’re listening to me and then go, “Oh, you can do an airline, and you could do that.” I don’t know. I don’t know if I would tell anyone that they could stumble upon it that way. If you get really good at one thing, stick to that. If it’s one product, one type of customer, just be really good at that. It works.

Ryan Goodman:

Sure, awesome advice. To wrap things up here, what would be the number one point you want to drive home to other peers that you have listening to the podcast?

Scott Wittstock:

Remember, your service is worth something. Don’t undervalue yourself by giving away free or gimmicky things. Don’t … The free network assessment seems like a good idea, but is it really? That’s a lot of work. Value your work. An engineer or an architect doesn’t give away the floor plans without someone becoming their client first. I think there’s a fine line between doing something that’s … Understanding that to try to earn a customer, earn the customer. Don’t buy the customer.

Scott Wittstock:

I think that would be one thing that I wish I would see out there a little bit more, because you run up against these providers that, “Oh, we do this free, free, free, free.” There’s nothing free. We all should know that by now. There’s just simply nothing for free. It is … If we’re going to just run a tool, that’s fine. Call it what it is.

Scott Wittstock:

That’s something I would recommend is just really search for customers that want to use technology to enhance their business and don’t view it as a burden to their business. Find people that base it off of value, not price.

Ryan Goodman:

There are lots of businesses out there that know they need help to scale.

Scott Wittstock:

Yeah, every one of these businesses now have a computer, and every one of them needs help. Whether they believe that or not is a different story. That is something that I … Just don’t undervalue what you can bring to the table. I’m not saying go out there and charge millions of dollars for running a network assessment tool, but I find that’s something … “Well, this company’s going to give a free network assessment.”

Scott Wittstock:

“Okay, great. What does that mean?” That’s what we’re seeing out there now. Our competition’s a little different than it used to be, even a few years ago. We have … I mean, now if you look at it, every copier company’s an MSP, every telecom company. Even the big players, like CenturyLink and those guys, are offering MSP services. They sell Office 365 now. You’ve got cable companies and every former equipment dealer, or phone system equipment dealer, now says MSP on their website.

Scott Wittstock:

We have a lot of new competition, as well as a lot of opportunity for everyone, but I hope we’re not going down to a race to zero kind of game, where it’s going to be a commodity, not a value that we’re going to bring to customers. The more people that are out there going, “Hey, we should stop doing this, because our business has a value. Our engineering and our skills have a value” … I think it’s something to be very cautious about. I know it’s hard, as you’re growing your business. You just fight for every scrap you can get, at some point, but I don’t know how to get past that. I think you should just set your sights on getting past that.

Ryan Goodman:

Right, and I think that’s the point of how you’ve grown the business is, yes, we all have to reach that next level. It’s not easy, and oftentimes there’s not shortcuts, but those are also the opportunities that you’ve looked for in growing your business and acquiring those. You’re ready to embrace the chaos, so just be ready to get through it.

Scott Wittstock:

Yeah, yeah, I know it’s hard. Like I said at the beginning that wars that are won during the fog of war are those that communicate. Just keep it up. That’s what we try to do. We’d never say we were perfect at anything, but we keep striving to be.

Ryan Goodman:

Well, Scott, it was awesome having the conversation. Lots of great information and wisdom, and I want to thank you for joining us. Hey, hopefully we can do this again. Maybe we’ll talk about the next acquisition in the future.

Scott Wittstock:

I would love it. Thank you very much for having me. I really appreciate it. I enjoy every podcast you send out. It’s nice to hear what other people are doing. I enjoy it. Thank you.

Thanks again for joining us today on The Confessions of an IT Business Owner podcast, where we believe that healthy cash flow is critical for your IT business, automation is paramount, and building trust with your clients by looking professional will help grow your business. A special thanks, again, to Scott Wittstock from Fidelis, Inc. Fidelis, Inc. can be found online at www.fidelisnw.com. To download the full podcast or listen to some of our previous episodes online, check us out at connectbooster.com/podcast.

Ryan Goodman:

Thanks again for joining us today on The Confessions of an IT Business Owner podcast. We’ll talk to you soon.